What is Labor turnover?

By Abhishek Kathpal | Updated 07 August, 2022

It is harder and more expensive than ever to acquire staff, despite the large number of applicants on the labor market. Therefore, businesses need to develop measures to lower employee turnover. HR managers face problems such as locating qualified recruits and keeping top personnel on staff.

What is Labor turnover

Labor turnover meaning and definition

Labor turnover is commonly referred to as staffing turnover. It is the ratio of employees who leave a company by attrition, termination, or resignation to all employees on the payroll during that time. Labor turnover can also be defined as the rate of change in the labor force over a given time period.

As a result of employees quitting and being replaced, labor turnover occurs in every firm. It is a factor that affects labor productivity, which in turn affects labor costs. Low labor turnover denotes that there were few hires and fires throughout the fiscal year, whereas high labor turnover denotes that employees are leaving the organization quickly and their tenure is unstable. Both internal and external workforce turnover is possible. In the first case, the worker changes jobs inside the same company, whereas in the second, he must resign from his current position and join a different one.

Causes of Labour turnover

There are two major types of causes of labor turnover: preventable or controllable, and inevitable or inescapable.

a) Preventable causes

The refers to situations where management must maintain a close eye on its employees regularly to keep the ratio of labor turnover as low as possible. Examples include:

a) Low remuneration.

b) Job dissatisfaction.

c) Extreme working conditions.

d) Draining working hours.

e) Unavailability of adequate facilities.

f) Lack of proper welfare package.

g) Low promotion opportunities.

h) Lack of developmental programs.

i) Lack of job security.

j) Low incentives.

k) Unfair treatment.

l) Temporary Job

b) Unpreventable causes

It is said to be the unavoidable source of labor turnover when management must urge workers to quit the company for one reason or another. Examples include

a) Incongruent organizational culture

b) Discharge

c) Conviction of the workers in criminal cases.

d) Misconduct of workers.

e) Sickness, accident, etc., of workers.

f) On account of personal betterment.

g) Relocation.

h) Illness or accident.

I) Domestic responsibilities like marriage.

j) Discharge.

k) Death.

l) Retirement.

Effect of Labour turnover

Due to the following factors, excessive labor turnover hurts productivity, increases expenses, and lowers morale.

a) The uninterrupted flow of production is disturbed by frequent changes in the labor force. Low production is the end effect.

b) Because new hires perform less efficiently, production costs increase.

c) The expense of hiring new staff, their training, and the time it takes to train them all to raise production costs.

Types of Labour turnover

a) Voluntary:

When a worker departs from the company on his or her own volition.

b) Involuntary:

When an employee's employment is ended.

c) Functional:

the removal of underperforming individuals from an organization to improve performance as a whole.

d) Dysfunctionality:

This is the result of skilled, high-performing people quitting the organization and leaving it in poor condition.

Impact of Labour Turnover:

a) Workforce instability and, ultimately, employment.

b) It raises the cost of employing people because it requires more frequent recruitment, selection, placement, training, etc.

c) Frequent leaving and entering of companies lowers employee productivity.

d) Low production levels and quality

e) Employees who leave their jobs are denied a variety of benefits such as opportunities for graded pay, provident funds, leave, and pensions, among other benefits.

f) The increased cost of production

g) Using human and non-human resources insufficiently or only partially.

Reduction of Labour turnover

The ability to hire new talent is one advantage of regular workforce turnover for the business. A weak labor market is indicated by excessive employee turnover, hence this is undesirable. Therefore, it is imperative to make every effort to stop the causes of high staff turnover rates. To reduce employee turnover, the following activities could be taken:

a) To hire the best individual for the job, an appropriate personnel policy should be created.

b) It is important to create good working circumstances that may be beneficial to productivity and health.

c) It is necessary to implement fair pay rates, allowances, and other financial perks.

d) There should be the greatest possible introduction of non-cash perks or fringe benefits.

e) Keep a close eye on harmful workers.

f) Give the work-life balance priority.

g) Take note of the level of staff engagement.

h) Make performance evaluations uniform.

i) Create possibilities for growth and career routes.

j) Concentrate on onboarding.

k) To identify problems and examine current turnover.

How to calculate labour turnover

The total number of workers who quit in a certain time frame (month, quarter, year, etc.) divided by the typical number of workers for the chosen period yields the total number of workers who quit. Calculate the staff turnover rate by multiplying that figure by 100.

TOR= no of terminates during period/ no of employees at the beginning

TOR= turnover rate.

About the Author

Abhishek Kathpal

Abhi is the co-founder at Longlist.io. Funded by US based OnDeck, Longlist is currently enabling 50+ businesses to increase their candidate and client reach outs, automating the workflow across stages.

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