Labor Turnover - Business Lecture Notes

Introduction

• Labor Turnover: A crucial HR performance measure indicating the percentage of employees who leave a business over a specific period.
• Staff Retention: The ability of a business to keep its key employees. Closely related to labor turnover.

Related Measures

• Labor Productivity: Evaluates employee output (e.g., units or revenue per employee).
• Absenteeism: Examines the extent of employee absence from work.

Reasons for Employee Departure

• Unsuitability: Employees may not meet job requirements or fulfill contracts.
• Redundancy: Due to strategic changes or cost reductions.
• Retirement: Natural employee lifecycle.
• Personal Circumstances: Illness or other personal reasons.

Importance of Managing Employee Retention

• Essential for keeping key staff.

Calculating Labor Turnover

• Formula: (Number of leavers / Average number employed) x 100
• Example:
  • Manufacturer with 80 employees.
  • 12 recruits, 15 left.
  • Calculation: (15 / 80) x 100 = 18.75%

Implications of High Labor Turnover

• Costs: Recruitment and training expenses.
• Operational Impact: Pressure on remaining staff, disruption in productivity and operations.
• Quality and Customer Service: Potential decline, especially in service sectors.

Factors Influencing Labor Turnover

• Sector Specific: Higher in leisure and hotel sectors due to seasonal demand and reliance on temporary staff.
• Financial Incentives: Better pay or rewards elsewhere.
• Working Conditions: Poor conditions can drive turnover.
• Promotion Opportunities: Lack of advancement can cause employees to leave.
• Economic Conditions:
  • Downturn: Turnover decreases due to fewer job alternatives.
  • Recovery: Turnover increases with more job opportunities.
• Employee Loyalty: High loyalty often results in low turnover.

Strategies to Improve Labor Turnover

• Recruit Right: Ensure proper recruitment practices.
• Retain Key Staff:
  • Competitive pay.
  • Well-designed job roles.
  • Job enrichment and rotation.
  • Reward loyalty with services bonuses and perks.

Conclusion

• Labor turnover is a key HR metric that must be understood and managed effectively to ensure the success and stability of a business.