It is the rate of change in the labour force during a specified period measured against a suitable index. The standard or usual labour turnover in the industry or locally or the labour turnover rate for a past period may be taken as the index or normal against which actual turnover rate is compared. The methods of calculating labour turnover are given below :
(i) Replacement method = Number of employees replaced ¸ Average number of employees. . on rolls during the year
(ii) Separation method = Number of employees separated during the year ¸ Average number . of employees on rolls during the year
(iii) New Recruitment Method = No. of workers newly Employed ¸ ¸ Average number of . employees on rolls during the year
(iv) Flux method = ( Number of employees separated + replaced ) ¸ Average number of . employees on rolls during the period
(v) If there is new recruitment , then the calculation should be
Number of employees ( separated + accessions )
Flux method = ¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾ ´ 100
Average number of employees on rolls during the period
Note : 1. Separation = Resign + Retirement + Retrenchment + Death
2. Accessions= Replacement + New recruitment .
Discuss the two types of cost associated with labour turnover.
Answer : Types of cost associated with labour turnover
Two types of costs which are associated with labour turnover are :
Preventive costs : These includes costs incurred to keep the labour turnover as a low level i.e., cost of medical schemes. If a company incurs high preventive costs, the rate of labour turnover is usually low.
Replacement Costs : These are the costs which arise due to high labour turnover. If men leave soon after they acquire the necessary training and experience of work, additional costs will have to be incurred on new workers, i.e., cost of advertising, recruitment, selection, training and induction, extra cost also incurred due to abnormal breakage of tools and machines, defectives, low output, accidents etc., cause due to the inefficiency and inexperienced new workers.
It is obvious that a company will incur very high replacement costs if the rate of labour turnover is high. Similarly, only adequate preventive costs can keep labour turnover at a low level. Each company must, therefore, workout the optimum level of labour turnover keeping in view its personnel policies and the behaviour of replacement costs and preventive costs at various levels of labour turnover rates.
Causes of labour turnover: The main causes of labour turnover in an organisation/industry can be broadly classified under the following three heads :
a. Personal Causes
b. Unavoidable Causes, and
c. Avoidable Causes
Personal causes are those which induce or compel workers to leave their jobs such causes includes the following:
i. Change of jobs for betterment.
ii. Premature retirement due to ill health or old age.
iii. Domestic problems and family responsibilities.
iv. Discontentment over the jobs and working environment.
In all the above cases the employee leaves the organisation at his will and, therefore, it is difficult to suggest any possible remedy in the first three cases. But the last one can be overcome by creating conditions leading to a healthy working environment. For this, officers should play a positive role and make sure that their subordinates work under healthy working conditions.
Unavoidable causes are those under which it becomes obligatory on the part of management to ask some or more of their employees to leave the organisation, such causes are summed up as listed below :
i. Seasonal nature of the business;
ii. Shortage of raw materials, power, slack market for the product etc :
iii. Change in the plant location;
iv. Disability, making a worker unfit for work;
v. Disciplinary measures;
vi. Marriage (generally in the case of women).
Avoidable causes are those which require the attention of management on a continuous basis so as to keep the labour turnover ratio as low as possible. The main causes under this case are indicated below;
1. Dissatisfaction with job, remuneration, hours of work, working conditions, etc
2. Strained relationship with management, supervisors or follow workers;
3. Lack of training facilities and promotional avenues;
4. Lack of recreational and medical facilities;
5. Low wages and allowances.
Proper and timely management action reduce the labour turnover appreciably so far as avoidable causes are concerned.
Effects of labour turnover :
The effect of labour turnover on cost of production is that high labour turnover increases the cost of production in the following ways :
Even flow of production is disturbed; Efficiency of new workers is low; productivity of new but experienced workers is low in the beginning;
There is increased cost of training and induction;
New workers cause increased breakage of tools, wastage of materials etc.
In some companies, the labour turnover rates is as high as 100%; it is means that on the average, all the work is being done by new and inexperienced workers. This is bond to lower efficiency and production and increases the cost of production.
Remedial steps to minimise labour turnover :The following steps are useful for minimising labour turnover.
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1. Exit Interview: An interview may be arranged with each outgoing employee to ascertain the reasons of his leaving the organisation.
2. Job analysis and evaluation : Before recruiting workers, job analysis and evaluation may be carried out to ascertain the requirements of each job.
3. Scientific system of recruitment, placement and promotion : The organisation should make use of a scientific system of recruitment selection, placement and promotion for employees.
4. Enlightened attitude of management : The management should introduce the following steps for creating a healthy working atmosphere.
Service rules should be framed, discussed and approved among management and workers, before their implementation. Provide facilities for education and training of workers. Introduce a procedure for settling workers grievance.
5. Use of Committee : Issues like control over workers handing their grievances etc., may be dealt by a committee, comprising of members from management and workers.
What is the impact of ‘Labour Turnover’ on a manufacturing organisation’s working ?
Labour turnover refers to the rate of change in the composition of labour force of a concern during a specified period of time. The impact of labour turnover on a manufacturing organisation’s working is manifold.
In fact the labour turnover increases the cost of production in the following ways :
Even flow of production is disturbed.
Cost of recruitment and training increases.
Breakage of tools, wastage of materials increases.
Overall production decreases due to the time lost between the leaving and recruitment of new workers.
Reduction is sales accounts for loss of contribution and goodwill consequently.
Total Earnings of Worker = Basic + DA + OT + Bonus or Incentive
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