The Cost of Attrition
Human capital is a necessary and costly expense in most organizations. High turnover can also equate to higher costs. As such, tracking and calculating attrition levels should be a part of key performance indicators (KPI's) for any organization. The cost of human capital turnover (attrition) is a function of recruiting, training and loss of productivity.
Turnover is a fact of life for business. The challenge is defining a metric that can be used across departments and industries to compare attrition rates. Metrics provide a basis for comparison and highlight opportunities for improvement. There are two sets of data you will need: 1) the number of employees exiting during each month and 2) the average number of staff in any given month. The former is data obtained from internal human resource reports. The latter can be calculated by taking the average employee count at the end of each month.
The Formula & Real Life Example
Once you have the right data, use the formula below to calculate attrition:
Attrition = (number of employees exiting the job / average number of employees during the period) x (12 / number of months in the period)
For example, if the number of employees exiting the job over a six-\month period is 20, and the average number of employees during the same six-month period is 500, the calculation would be: (20 / 500) * (12 / 6) = .08. The annualized turnover rate is 8 percent.