Labour Turnover

It is often found that workers or employees in an organisation change from one employment to another sometimes for better prospects, sometimes for better working conditions or sometimes they are forced to leave their jobs. Such mobility of labour is called labour turnover.

Labour turnover is defined as the proportion of a firm’s workforce that leaves during the course of a year.There are 3 method of calculating labour turnover – Replacement Method , Separation Method , Flux Method( which is the combination of both the methods)

It is important to remember that all businesses lose staff – for a variety of reasons. These can be avoidable causes or unavoidable ones.

AVOIDABLE CAUSES

It includes reasons like :

1.Retrenchment of workers because of seasonal requirement , shortage of raw material , lack of planning etc.

2.Low wages.

3.Bad working conditions.

4.Dissatisfaction with the job.

5.Lack of training facilities leading to stagnation

UNAVOIDABLE CAUSES

Theses can be Personal betterment avenues , Retirement , Sickness , Accident and death , change of residence etc.

There are two types of costs included in labour turnover:

PREVENTIVE COST – These are the cost which the company incurs to prevent the labour from leaving the job. These costs are incurred in the form of giving more and more benefits to employees like medical facilities , transport facilities , housing , education for children of employees etc.

REPLACEMENT COST – These costs are those which are incurred after the workers have left the company. Such as cost of training new employees , cost of advertising the post, loss of production due to delay in appointing new workers, etc.

However, there are some advantages of a firm experiencing labour turnover:

• It gives the chance for new people to be brought into the business who may have fresh ideas and up to date market knowledge.
• Workers with specialist knowledge or expertise can be employed rather than having to train up existing lower skilled employees.

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