Labour Turnover, its Causes and Effects notes for Cost & Management- CS Executive

Labour Turnover, its Causes and Effects notes for Cost & Management- CS Executive

Labour turnover is defined as the proportion of a firm’s workforce that leaves during the course of a year or ratio of a number of persons leaving in a period to the average number employed.

Labour turnover is all about employee retention – i.e. the ability of a business to convince its employees to remain with the business.

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Causes of Labour Turnover

Causes for labour turnover could be classified into three types. They are:

1. Personal Causes – those which induce or compel workers to leave their jobs.

• Retirement due to old age.
• Accident making workers permanently incapable of doing work.
• Women workers may leave after marriage in order to take up household duties/family
• Dislike for the job or place.
• Workers finding better jobs at some other places.
• Change of job for betterment.

 

2. Unavoidable causes – those under which it becomes obligatory on the part of management to ask some or more of their employees to leave the organization

• Seasonal nature of the business.
• Change in plant location.
• Shortage of Raw material.
• Workers may be retrenched due to a shortage of work.
• Disability, making a worker unfit for work.

 

 

3. Avoidable causes – those which require the attention of management on a continuous basis, so as to keep the labour turnover ratio as low as possible

 

• Low wage rates and other allowances when compared to other concerns.
• Unhealthy and bad working conditions.
• Lack of job satisfaction due to the faulty placement of workers.
• Heavy workload and long working hours.
• The absence of sound training programmes.
• Lack of proper promotion methods.
• Unsatisfactory medical and recreational facilities.
• No job security.

 

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 Effects of Labour Turnover

Effects of Labour Turnover depends upon the rate of labour turnover. Labour Turnover cannot be eliminated completely. There must be some labour turnover on account of unavoidable causes like retirement, death, etc. But, high rate of Iabour turnover is always unhealthy for the organization due to following reasons:

1. New workers take time to become efficient. Hence lower efficiency of new workers increases the cost of production.
2. New workers being unfamiliar with the work give more scrap, rejects and defective work which increases the cost of production.
3. Selection and training costs of new workers recruited to replace the workers who have left increase the cost of production.
4. Constant changes in the workforce will affect the continuity of work. As a result, the overall production may be reduced.

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