Labor Turnover
PRESENTED BY:
ASAD SALMAN
SHUMAILA ASHRAF
RAZA MALIK
AHMED ALI
AEMAN KHAN
NOUMAN TAHIR
Labor Turnover
Labor turnover is defined as the proportion of a
firm's workforce that leaves during the course of a year. If the
rate of labor turnover is high, this is a sign of instability of
labor and it adversely affects the efficiency as well as the
profitability of the firm. The cost of labor increase when the
experienced workers go out of the firm and new and
inexperienced worker are hired who are to be trained.
Therefore, the labor turnover proves to very costly for the
labor business and every effort should be made or reduce
the frequency of labor turnover.
TYPES OF EMPLOYEE TURNOVER
There are many possibilities that may lead to your employee’s exit. Whether
voluntary or involuntary, you need to get to the bottom of why any employee
leaves.
Here are four types of employee turnover you need to analyze:
1. Retirements
People tend to say exits due to retirement are inevitable and out of
the company’s control. However, surveys show that some employees
become disengaged in their workplace and choose to enter retirement
early. And although they have voluntarily exited your organization, it
doesn’t mean their career has ended.
2. DESIRABLE AND UNDESIRABLE
TURNOVER
Turnover often has a negative connotation, yet turnover isn’t always
a negative event.
Desirable and Undesirable Turnover
Desirable turnover occurs an employee whose performance falls
below the company’s expectations is replaced by someone whose
performance meets or exceeds expectations. It’s desirable because
poor job performance, absenteeism and tardiness are costly replacing
a poor performer with an employee who does his job can improve the
company’s profitability. Desirable turnover also occurs when
replacing employees infuses new talent and skills, which can give an
organization a competitive advantage. Conversely, Undesirable
turnover means the company is losing employees whose
performance, skills and qualifications are valuable resources.
3. VOLUNTARY TURNOVER
When an employee leaves the company by their own desire , it’s called voluntary
termination. Employees give a number of reasons for leaving their jobs. They may
be accepting employment with another company, relocating to a new area or
dealing with a personal matter that makes it impossible to work. When an
employee voluntarily terminates the employment relationship, they generally give
the employer verbal or written notice of intent to resign from her job.
4. Involuntary Turnover
Employee termination for poor job performance, absenteeism or violation of
workplace policies is called involuntary turnover – also referred to as termination,
firing or discharge. It’s involuntary because it wasn’t the employee’s decision to
leave the company. Layoffs could also be considered involuntary terminations,
though layoff procedures usually are handled differently from termination. Some
layoffs have certain federal and state provisions that aren’t afforded to employees
who are fired because of performance or policy violations.
CAUSES OF LABOR TURNOVER:
1. Personal causes
2. Unavoidable causes
3. Avoidable causes
1. Personal Causes
Workers may leave the organization purely on personal grounds, e.g.
a. Domestic troubles and family responsibilities.
b. Retirement due to old age.
c. Accident making workers permanently incapable of doing work.
d. Dislike for the job or place.
e. Workers finding better jobs at some other places.
In all such cases, labor turnover is unavoidable and the employer can
practically do nothing to reduce the labor turnover.
2. AVOIDABLE CAUSES
(a) Low wages and allowances may induce workers to leave the factory and join
other factories where higher wages and allowances are paid.
(b) Unsatisfactory working conditions e.g., bad environment, inadequate
ventilation etc. leading to strained relations with the employer.
(c) Job dissatisfaction on account of wrong placement of workers may become a
cause of leaving the organization.
(d) Lack of accommodation, medical, transport and recreational facilities.
(e) Lack of promotion opportunities.
(f) Unfair methods of promotion.
(g) Lack of security of employment.
(h) Lack of proper training facilities.
(i) Unsympathetic attitude of the management may force the workers to leave.
3. UNAVOIDABLE CAUSES
In certain circumstances it becomes necessary for the management to
ask some of the workers to leave the organization.
These circumstances may be as follows:
a. Workers may be discharged due to insubordination or inefficiency.
b. Workers may be discharged due to continued or long absence.
c. Workers may be retrenched due to shortage of work.
THE PSYCHOLOGY OF INVOLUNTARY
EMPLOYEE TURNOVER
It focuses specifically on the phenomenon of involuntary
turnover and examine the process by which Labor
Turnover leads to negative psychological states.
Job losers exhibited more psychological disturbance and
a more negative outlook on life than an employees
comparison group.
Job losers showed greater depression, anxiety,
somatization and self-reported physical illness than
employed.
PhD holder lose their job which leads to low self-esteem
and depression.
THE PSYCHOLOGY OF VOLUNTARY
EMPLOYEE TURNOVER
In the world of business, employees come and go. In some
instances, employees leave not of their own accord while in
others, employees elect to part ways with the company. While
voluntary employee turnover is a natural part of the business
process, and often less stressful than forced alternatives,
such as firings or layoffs, some psychological ramifications
result from turnover of this type. Keep the mental impact of
employees' elective leaving in mind when handling employee
departures.
Growth Desires
For many employees, the decision to leave the company
results from a desire to grow as workers. These individuals
may see their current situation as a stagnant one in which
they cannot continue to develop as workers, leading them to
decide that leaving is the only option.
Co-Worker Upset
Depending upon the relationship that the departing worker had
with his co-workers, seeing the individual go could result in
employee upset. If an employee is highly liked, this issue will likely
be more pervasive. To help employees overcome the emotional
issues that accompany losing one of their own, managers should
work to celebrate all employees who elect to leave, giving them a
sendoff that will help heal the wounds that the individual's
departure may leave
Manager Emotions
If a manager has worked closely with an employee, seeing her go
can be difficult for him to stomach as well. When a manager
works to foster a close relationship with a worker, mentoring the
individual with care, it can feel like a failure to see this individual
go. To keep this chagrin over the loss of an employee at bay,
managers must remember that losing employees does happen
and that, no matter how hard they try to please everyone,
sometimes business relationships end.
Change Challenges
Another challenge associated with losing employees is the
challenge generally associated with change. Any time change
occurs in the dynamic of a workplace, this change can prove
difficult to handle. Often, losing an employee, even if it was simply
a result of the employee electing to part ways, requires a
redistribution of work and a change, albeit potentially slight, in the
way that things are done within the workplace, something that will
take time to get accustomed to.
MEASUREMENTS OF LABOUR TURNOVER
Labour turnover is not something which is undesirable. A
minimum labour turnover ratio which can be considered as
desirable lies between 3% to 5%. The labour turnover
relation can be calculated by a concern once in 6 Months or
once in a year.
There are 4 different methods by which this rate can be
evaluated, These methods include:
1. ACCESSION METHOD
This method reveals the additions of the pay roll. Under this method Labour Turn Over ratio
is calculated by applying the following formula
Labour Turnover = Number of accession in period × 100
Average Number of workers in a period
2. Separation Method
This method Includes all those workers who have left during a specific period of time due to
retirement, discharge etc. The formula for calculating Labour Turn Over Ratio by using this
method is
Labour Turnover = Numbers of workers left during a period × 100
Average Number of workers during a period
3. FLUX METHOD
This method shows the total change in the composition of the labour force due to
separation and replacement of workers. Flux method is also known as Separation-Cum-
Replacement method. The formula for calculating Labour Turn over by using this
method is
Labour Turnover = Number of workers separation +
Number of workers replacements × 100
Average Number of workers in a Period
4. Replacement Method/Net Labour Turnover
This method takes into account only those new workers who have joined in place of
those who have left the job, The formula used for this method is
Labour Turnover = Number of workers replaced during a period × 100
Average number of workers during a period
Employee turnover calculations may also factor in different
types of turnover, such as involuntary and voluntary, or
even more specific reasons why employees leave, such as
poor performance, absenteeism or employees accepting
new jobs elsewhere. Turnover calculations are helpful to
determine hiring costs, training requirements or estimating
staff time devoted to recruitment activities.
