What is Labour Turnover? Definition, Causes And Effects

Definition:

Labour turnover is defined as the ratio of the number of labour or staff who leaves an organisation to the total number of the workforce on its payroll in an accounting period.

Labour turnover can be through resignation, retirement, unsuitability, change in circumstances, dismissal or attrition and varies from region to region and industry to industry. It is considered as an essential parameter to measure employee retention

The high percentage in terms of labour turnover denotes that the employees are leaving the company quickly and their duration is not stable whereas low labour turnover signifies only a small number of workforces has entered and left the firm in the fiscal year.

Labour turnover can be internal as well as external. The former is when labour leaves on position and is shifted to another in the same company, and the latter is when he has to go from his current job and join another organisation.

Causes of labour turnover

The causes of labour turnover can be categorized into the following-

1) Personal Causes

As the name suggests the personal causes for Labour turnover are the ones that are because of the employee, and these are

1. The employee is getting a better job in terms of monetary or additional benefits and wants to switch
2. An employee is facing health issues or has become old and wants to take premature retirement
3. Accident and death are also some essential causes of labor turnover
4. He is having personal problems in the workplace, and the resulting discontent has forced him to look for another job
5. Family responsibilities or some issues in the family life is causing him to switch the job
6. If the employee is a woman, she can leave the job because of marriage, pregnancy, childbirth or additional household duties. This cause labour turnover in an organisation

2) Avoidable causes

When the management has to keep a keen eye on its workforce and that too regularly to keep the ratio of labour turnover as low as possible then it is said to come under avoidable causes. These are

1. When the worker feels that he is being paid low wages compared to his counterpart in other organisation in the same industry, it can result in labour turnover because he will look for greener pastures
2. If the labour is getting low allowances compared to other workers in the same position, it can result in labour turnover
3. The main reason for labour turnover is dissatisfaction in his job because that will undoubtedly lead to him trying to find another one for the peace of his mind
4. Other critical avoidable causes of labour turnover are long or erratic working hours that can take a toll on the physical health of a person
5. Remuneration and extreme working conditions are also some avoidable causes of labour turnover
6. Lack of proper security measures is one of the biggest problems that employees are facing nowadays and are not willing to compromise on it. This results in labour turnover
7. It has become essential to provide medical facilities and its usage to the employees, and lack of it can result in labour turnover
8. If an employee is unable to maintain good relations with fellow-workers, peers, supervisors or management, then it can make his life miserable in the workplace. This can be avoided by a change in job to another organisation and is one of the significant reasons for labour turnover
9. If an organisation does not offer training to update existing skills and learn new ones, the employees do not want to stay attached to it because the chances of personal and professional growth in these firms are very less
10. Lack of promotional avenues is another cause of labour turnover in a company
11. By the end of the day or a week, the employee becomes too tired to deal with anything. By this point in time, he needs some recreational activities to rejuvenate and recuperate. If the organisation does not have any such action in its compound, then it can lead to labour turnover

3) Unavoidable causes 

When the management has to ask its employees to leave the firm for some reason or other, it is known as the inevitable cause for labour turnover.

1. The business in which an employee is working deals with seasonal products and during the off-season, the company cannot afford to maintain the high employment rate and has to let go of some of the labour force
2. If the manufacturing unit is changing the location of its plant and shifting base, it will have to let go of a significant part of its workforce, and this can result in labour turnover
3. If the plant is facing any issues like power failure, shortage of raw materials or slow market trends, then it will have to ask some of its workforces to leave, and this will result in labour turnover.
4. Sometimes some of the labour are unfit to work or are suffering from a disability in such a scenario the organisation has no other choice except to let them go
5. If any worker has caused some issues in the company like insubordination, then the management has to let it go as part of disciplinary action
6. Inefficiency and absenteeism are unavoidable causes for labour turnover as the company has to let them go

Effects

Labour turnover is a natural occurrence because, over time, some employees will leave the firm because of some reason or other and gradually will be replaced by new members. Average turnover is unavoidable and can prove advantageous in several circumstances, but when it becomes excessive, there is still a chance to minimise the defection as it can result in several effects that might not be good for the company.

Positive effects of labour turnover

• Labour turnover means new entrants are being given a chance to make a difference. With new and innovative ideas, different values and beliefs they are capable of making a difference in the company
• New hires are generally equipped with the latest training and skills, and the possession of better competence is a blessing in disguise for the organisation
• New entrants are knowledgeable, active and sharp and can cause ripples in still water. The existing workforce which was complacent can suddenly feel new energy, and this can prove beneficial for the firm
• The current labour force has to be given constant promotions and raise and compared with it the cost of hiring a new labour force is very cheap
• The labour turnover brings with itself infusion of talent, fresh thought-process and changed mindset

Negative effects of labour turnover

• One of the harmful impacts of labour turnover is that it can cause upheaval in the real work and dealings. The imbalance hampers productivity because the work either eases or slows down when someone leaves the firm
• The new labour force does not know how work is done in this organisation, and this can lead to wastage, spoilage and defective work and ultimately high production cost
• When existing labour moves out of the organisation for the better opportunity, the others feel discouraged, and the de-motivation can have a direct effect on their efficiency levels
• Organisations have to provide training or learning course to new hires, and this increases their additional expense
• Mishandling of equipment and tools is one of the most common problems faced by recruits after labour turnover
• The hiring process involves several costs and is considered a waste of money, time and effort, and this is a burden on the company
• Machinery and equipment are idle during the period when the worker leaves a firm and is replaced by another one
• Continuous changes in the workforce prevent the execution of a proper planning process, and this can result in production loss for the company
• New hires need time to learn and get acquainted with work procedure. In such a case the rate of production decreases and depreciation of equipment increases
• The new labour force can’t maintain the quality and quantity held by the previous one because they will need some time to familiarise with the processes