first-year attrition rate

How to calculate attrition rate: First-year attrition formula

Accepting a new role should be exciting. But unfortunately, many new employees stumble upon certain roadblocks (almost) instantly. And that’s why more than 30% of them rarely choose to stick around after the initial 12 months. So, what’s with the first-year attrition? Why do so many people quit so early? How can you measure these rates and come up with effective solutions to turn your luck around? 

This brief guide will help you with the first-year attrition formula + a few essential tips that will get you started off on the right foot with your next hire. 

What is the first-year attrition rate?

Surveys and studies show that more than one-third of new hires choose to quit within their first year. What’s more staggering, 20% of them leave within the initial 45 days. So, the first-year attrition rate showcases this scenario – it entails the cutback in the workforce over a specific period, and it refers to those employees who have left voluntarily. It can also cover retirement. Finally, in this case, the employer usually doesn’t plan to source more new people to fill this vacancy again. 

What is the average attrition rate?

Studies show that every year, a company will experience an 18% turnover in its workforce. Also, a firm loses around 6% of its staff on average due to poor performance or staff reduction. On the other hand, around 13% of employees leave voluntarily each year. The attrition and turnover rates are higher among younger workers. Those who are 55 years or older have a median tenure of 9 years, while those whose ages range from 25 to 35 normally stick around for 2.8 years. 

Now, what is considered a good attrition rate

According to research, it’s 10% or lower. Still, there’s no way to be precise because these figures vary from one industry to another – and from one business to another too. 

When it comes to software developers, engineers, and other tech professionals, the new results don’t seem very encouraging. The average attrition rate in the IT industry is between 23 and 25%. In 2022, the US faces the most massive tech talent shortage of around 45%, followed by Western Europe and India. So, aside from using career pages and job boards or the help of recruitment agencies, companies will have to go the extra mile to hire the best industry experts. And they’ll certainly need a clever tactic or two to deal with attrition and turnover. 

Must-know: Attrition rate vs. turnover rate 

With all the new tools and gizmos, applicant tracking systems, and employee surveys, it’s easier than ever to measure and assess HR and recruitment data. Still, before you start to gather the information, it’s essential to understand the terms and metrics. Here’s where it gets tricky: some metrics feel interchangeable, like in the case of time to fill and a similar analysis time to hire. The same goes for attrition vs. turnover rate. So, what’s the key difference? Both can tell if employees are leaving your company. And both are super important! However, turnover keeps track of the rate at which employees that you plan to replace leave. In contrast, attrition is measured when staff members leave, and the employer doesn’t intend to look for new talents to fill their role. 

How to calculate the first-year attrition [formula]

Employee retention is an essential factor for any company. Regardless of your unique aims and aspirations, having a bunch of people looking for new job opportunities is never a good sign. And that’s why you need to get ultra-careful and thorough. Start by tracking the key recruitment metrics. And don’t fail to measure success after your new team members jump on board. So, how do you learn precisely where you stand? Here’s the simple formula you must put to use:

Attrition rate = (No. of separations / Average no. of employees) x 100.

In other words, you should divide the number of full-time employees who have left (per month) by the average number of employees. Then, you multiply the result by 100 – and voila! You have your attrition rate covered. 

Now, how do you calculate the early attrition rate? The math is quite similar. Here are the prime elements you must take into account:

First-year attrition rate = No. employees who left within the first year / total no. of employees hired within that same year x 100

It’s vital to keep track of these calculations and compare your results regularly. That way, you’d know if there are some issues that need to be addressed – and hop to it quickly! 

How to get improved results [3 simple tips for lower turnover & attrition rate]

The key reasons for job dissatisfaction in these early stages are mainly based on poor communication and faulty recruitment processes. Many quit due to unmet expectations and vague or inaccurate job descriptions. Management issues and similar organizational mistakes are also among the top causes for new hires to throw in the towel and resume the search for the employer of choice. And finally, if people sense that there’s no room for personal and professional development, they’ll move on and seek a more suitable and rewarding career opportunity. So, here’s a brief guide that will help you avoid these slips and unwanted (+ possibly devastating) consequences. 

Improved recruitment strategies

Efficient recruitment strategies aren’t solely the key to excellent candidate experience and a strong employer brand. They can reach far into the future – and basically, make or break your retention rates. In other, more scary & cataclysmic words: hiring the wrong person can cost you a lot! Luckily, there are tested ways to ensure that miss-hires rarely/never happen. And it goes like this:

  • Give a once-over to every job description and be extra sure about each point, requirement, and benefit you have listed. 
  • Once you’re positive that your JDs are fail-proof and distribution ready, explore various platforms and channels where your target audience can see them. Here are a few good sources to visit: Slack channels, LinkedIn, Twitter, Reddit, and some Facebook groups.
  • Streamline all processes and stages from application to the final interview and job offer. Keep them simple and standardized, and make sure to be super careful with candidate assessments. 
  • Let employees take part in both recruitment and selection processes. Involve them in interviews, keeping in mind that this approach offers multiple points of view. Ask them for recommendations and consider employee referrals as the most effective way to hire
  • Survey your candidates and let them be honest about your hiring process and the experiences they’ve obtained from it. Learn from your mistakes and turn them into a future advantage. 

Use these key points as a basic guide. But make sure that you modify and expand these simple guidelines to match your unique objectives and needs. 

Preboarding & Onboarding 

Preboarding and onboarding are super important. And they usually go hand in hand. However, there’s a massive difference between the two. Preboarding refers to the time between job offer acceptance and a new hire’s official first day. Onboarding comes right after. It begins with the start date and, ideally, lasts for about three months. Both processes have similar aims and come with substantial benefits. For once, they help companies foster loyalty from the very beginning. They kickstart employee engagement very early and show new teammates that they’re appreciated even before they drive some results. More importantly, when structured and conducted correctly, preboarding and onboarding boost retention, preventing first-year attrition and high turnover rates. 

So, to do it properly, you must plan it carefully and be prepared for the brand-new hire’s warm welcome. Also, make sure to include various people and offer them a roadmap so that their skills and knowledge can be put to use. Always provide a mentor and set benchmarks and goals with them. Finally, offer regular feedback and let the employees know whether they have achieved the desired outcomes.

Hiring through referrals

According to surveys and numerous studies, employee referrals are the ultimate way to hire and retain the best candidates. Translated into numbers, new hires that were referred by an employee tend to stick around for four years – or longer! And once you set up a referral program that works like a charm, you will undoubtedly see a 40% increase in your retention rates. And finally, around 88% of employers would choose this hiring tactic over any other because it gets them more qualified candidates (more quickly) and helps them save up some money (big time!). 

So, here’s how to do it right & hire the most suitable people: 

  • Be clear (and objective) regarding job requirements, skills, and responsibilities,
  • Communicate with employees and keep all your potential referrers posted about the roles you aim to fill and other short and long-term goals,
  • Create a bonus strategy that will combine financial and non-financial rewards, and don’t forget to show appreciation,
  • Use various tools and try out different tactics to see what works best for your company and referrers.

Finally, it’s imperative that you keep things as simple as possible. Don’t waste time, and don’t reach for lengthy and complicated forms your employees will have to feel out to recommend a candidate. Once you complete these steps, you will enjoy the numerous benefits of hiring through referrals.

Don’t fail to track your essential metrics

Yes, starting a new position can (and should) be exciting. But it also has to feel safe and inspiring. And it’s up to employers to help their new hires get these positive experiences – and stick around! So, if you want to learn more about the first-year attrition rate, how to calculate it, and what to do to get better results, be sure to give this guide a once-over. 

And if you need a hand with sourcing & hiring the most skilled developers and other tech talents, we have just the tool you want