hi there in this business topic video we're going to take a look at one of the most popular and also important measures of human resource performance in a business and it's a measure called labor turnover labour turnover is just one of several important measures that can be used to determine uh how effectively the human resources side of a business is being managed labour turnover is very closely linked with a concept called staff retention staff retention is the ability of a business to keep its staff in particular key staff whereas labour turnover is a measure and it's a measure of the percentage of staff who leave during a particular period related uh measures which we look at in separate videos are firstly labour productivity which looks at the extent to which each employee or employees in general are able to output into a business for example by looking at units per employee or revenue per employee and we'll also take a look in another video at a concept called absenteeism which looks at the extent to which staff are absent from work of course with employer retention uh the you have what the key thing to remember is that there are a variety of reasons why staff leave a business or why businesses ask staff to leave for example the staff may simply be unsuitable they have not fulfilled their employment contract or they have not been able to prove that they're up to the job and of course that happens a lot in business in the same way that so too does redundancy arising from perhaps a change in strategy or the need to reduce costs but of course there are other reasons why employees leave it can be through retirement but also through changes in personal circumstances for example through illness now the key thing about employee retention is that it needs to be positively managed particularly for staff who the business want to keep and of course the the flip side of employee retention is labor turnover it's the rate at which employees leave a business so what is it well labor turnover is calculated so it's a calculation for you and it's expressed as a percentage so as soon as we see that we know we're going to have to be doing a calculation and multiplying by 100 to get a percentage number and it's the percentage of the workforce the employees that leave a business within a give a given period and typically labor turnover is measured over the course of each year so the percentage percentage of employees who leave a business each year let's just have a look at the formula and show you a quick example of how it's calculated it is a formula so what you do is you take the number of employees who leave during the period that's a year you divide it by the average number who are employed during the year to give you a a proportion of course it's a percentage so we times by 100. let's have a look at a simple example just to show the calculation in action i'm sure you'll be able to do these these numbers do the maths in this case we've got a manufacturer of breakfast cereals and in the last 12 months it's had 80 working in the business during the the same period uh it recruited 12 staff but 15 left now how do you calculate labor turnover well it's the number of employees leaving so in this case it's not 12 it's 15 15 left during the year and we're told that the average number employed by the the manufacturer was 80 so it's 15 divided by 80 and to get that percentage we multiply by 100 which gives you 18.75 percent a staff or labor turnover percentage of 18.75 now on the face of it that looks quite a high number a high percentage 15 staff leaving from a workforce that that only total 80. and of course it might be high but what we don't know is whether that's relatively high for the industry or that there were some specific circumstances in that particular year that led to a high labor turnover number so you've always got to be cautious about the percentage and trying to understand the context now high staff turnover can in many cases be a big issue for a business not the least because assuming these staff need to be replaced uh the business needs to incur recruitment and further training costs so a an obvious cost of having high staff turnover is relatively high recruitment and training costs but of course there are other costs perhaps you might say that they're somewhat intangible not necessarily as closely related to a financial cost um what happens to the staff who are left if you've got a high staff turnover and you've constantly maybe replaced them with temporary workers whilst you find permanent replacements that places a lot of pressure on the people who are left to continue to get the work done and of course it can disrupt productivity it can disrupt operations particularly whilst new staff are trained to replace those you've left and you might also argue that high staff turnover particularly in service businesses is likely to result in some challenging issues around quality and customer service and that's to be expected isn't it if a large proportion of your staff are relatively new to the business maybe have not had a chance to be trained properly one of the things that's bound to suffer likely to suffer is quality in particular customer service let's just think for a minute or two about the kind of factors that might affect the staff turn of a percentage now of course the key thing to remember is context here so in some businesses or some industries staff turnover can be relatively high historically consistently high and this is particularly the case in sectors like the leisure sector and the hotel sector where there is uh seasonal demand a peak in seasonal demand which necessitates the recruitment of seasonal staff but also where there is a large reliance on temporary staff to fulfill uh the the duties during the course of a year and of course the hotel and catering and other leisure sectors are notorious for high levels of staff turnover linking it back to motivation of course you'll know that uh there are lots of other financial reasons why staff may leave a job not the least being the ability to be able to get better pla pay or better rewards elsewhere maybe the working conditions are not satisfactory or maybe they just feel that there isn't sufficient opportunity for promotion at their existing employer and so they go to a better alternative perhaps a competitor or perhaps to a different sector altogether uh let's look at a couple more factors from the list that you can read them yourself but let's uh let's pick out the second one down there economic conditions now it's often the case that when there is an economic downturn and demanding the economy falls and perhaps unemployment rises that's often a circumstance where staff turnover falls across the economy and across industries and the key reason for this is that there are fewer jobs out there fewer alternatives for staff to move to and therefore they're perhaps more likely to stay where they are whilst the economic conditions are uncertain conversely as economic conditions start to start to strengthen and there are more job opportunities out there and perhaps opportunities for better pay better rewards that in general is often thought to lead to a general increase in staff turnover and i'll pick the bottom one out as well because i think that's quite interesting you often find that the businesses with lowest staff turnover tend to have those with relatively high and often exceptionally highly loyal staff who've grown up with the business appreciate the values and the culture of the business and therefore they're less likely to be attracted by perhaps more uh better perhaps better paid or alternative jobs they simply want to stay with where they are because they're happy working with that employer so i think a high level of employee loyalty is often is usually associated with relatively low levels of staff or labor turnover what can you do to improve staff turnover labor turnover well obviously the most important thing is to make sure you recruit the right people in the first place so um better off making sure you've got the recruitment right rather than having to let people go shortly after you've recruited them and then of course what you need to do is a whole bunch of things to try to keep your best staff stuff you really want to hang on to paying them well paying them competitively ensuring that their jobs are properly designed properly structured and include all the the the intangible elements the motivational elements that make work worthwhile for those people job enrichment job rotation and of course the other key opportunity to improve staff turnover is to reward loyalty to give staff awards long service bonuses and other perks in return for them staying in the business there we go that's a brief introduction to an important ratio an important percentage a measure of hr performance called labor turnover