In this article we will discuss about:- 1. Measurement of Labour Turnover 2. Causes of Labour Turnover 3. Effects 4. Cost 5. Control 6. Treatment of Cost.
Contents:
- Measurement of Labour Turnover
- Causes of Labour Turnover
- Effects of Labour Turnover
- Cost of Labour Turnover
- Control of Labour Turnover
- Treatment of Cost of Labour Turnover
1. Measurement of Labour Turnover:
Labour turnover is not undesirable. A minimum labour turnover ratio of 3% to 5% is quite desirable. It is only a high or excessive labour turnover ratio is undesirable. So to know whether its labour turnover ratio is low or high, every organisation should measure its actual labour turnover ratio during a specified period.
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The labour turnover ratio can be calculated by a concern once in a month, once in a quarter, once in six months or once in a year. But, usually, most of the concerns calculate the labour turnover ratio once in a year.
There are three alternative methods by which this rate is computed. Once a particular method is used, it should be consistently followed for comparative analysis.
They are:
1. Separation Method:
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This method takes into account only those workers who have left during a particular period.
Its formula is:
2. Replacement Method:
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This method takes into account only those new workers who have joined in place of those who have left.
Its formula is:
Note:
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If new workers are engaged for expansion programme or any other such purpose, they are not considered for this computation.
3. Flux Method:
This shows the total change in the composition of labour force due to separation and replacement of workers.
Its formula is:
Example:
From the following data given by the personnel department, calculate the labour turnover rate by applying:
(a) Separation Method,
(b) Replacement Method,
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(c) Flux Method,
No. of Workers on pay Roll:
At the beginning of the month- 800
At the end of the month- 1,200
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During the month, 15 workers left, 35 workers were discharged and 160 workers were recruited. Of these, 25 workers are recruited in the vacancies of those leaving, while the rest were engaged for an expansion scheme.
Solution:
Note:
Additional workers engaged on expansion plan are not considered for the computation of replacement rate.
2. Causes of Labour Turnover:
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Labour turnover may result from many causes. The causes responsible for labour turnover may be classified into two broad categories.
They are:
1. Avoidable Causes of Labour Turnover.
2. Unavoidable Causes of Labour Turnover.
1. Avoidable Causes of Labour Turnover:
The various avoidable causes responsible for labour turnover are:
1. Faulty Selection,
2. Lack of proper training facilities,
3. Low wages and allowances,
4. Unhappy relations with co-workers and supervisors,
5. Unsatisfactory working condition,
6. Trade union rivalry,
7. Lack of medical facilities, transport facilities, etc.
8. Inadequate job security and retirement benefit,
9. Wrong placement and the consequent lack of job satisfaction,
10. Long working hours,
11. Lack of incentives,
12. Favouritism in transfers and promotions, and
13. Unsympathetic attitude of the management.
2. Unavoidable Causes of Labour Turnover:
The various unavoidable causes responsible for labour turnover are:
i. Death or retirement,
ii. Illness or accident making the worker permanently handicapped,
iii. Domestic disputes,
iv. Long period of ill-health,
v. Domestic responsibilities to book after old parents,
vi. Change of service for personal betterment,
vii. Inefficiency of the workers,
viii. Immoral character of worker,
ix. Conviction of the worker in criminal suits, and
x. Marriage pregnancy etc. in the case of female workers.
3. Effects of Labour Turnover:
A certain amount of Labour turnover will always take place. To a limited extent this may be welcome particularly at the lower management level as it creates vacancies for internal promotions which act as motivation for young and ambitious workers. Moreover, new workers bring new ideas and methods of doing work from other organisations.
Labour turnover is expensive and generally it should be minimised because it leads to increased cost of production.
4. Cost of Labour Turnover:
As stated above, labour turnover involves costs. From the point of view of management, labour turnover costs may be classified into two categories.
They are:
1. Preventive Costs.
2. Replacement costs.
1. Preventive Costs:
Preventive costs refer to all those costs which are incurred by a concern to keep the workers satisfied and to prevent them from giving up their jobs.
Preventive cost includes the following:
i. Cost of providing good working condition.
ii. Expenses incurred on the maintenance of good relation between the workers and the management.
iii. Cost of free medical facilities given to workers and their formalities.
iv. Cost of welfare services, such as recreation facilities, free travel facilities, subsidised centres facilities, free education to children, etc.
v. Free housing facilities.
vi. Cost of incentive wage scheme introduced.
vii. Gratuity, pension and provident fund given to workers.
2. Replacement Costs:
Replacement costs refer to costs associated with the replacement of workers. In other words, replacement costs include expenses losses and wastages arising from the appointment of new inexperienced workers in the place of old experienced workers and costs of recruitment and training of new workers.
Replacement costs include the following:
i. Loss of output resulting from the loss of trained and skilled workers.
ii. Loss of output arising from the delay in the recruitment of new workers.
iii. Loss resulting from the deterioration in the quality of goods produced by the new inexperienced workers.
iv. Loss resulting from the scrap and defective work turned out by the new workers.
v. Loss of output, medical expenses, compensation for injury and costs of repairs to Plants and Machinery resulting from increased accidents due to the appointment of new and inexperienced workers,
vi. Cost of recruitment of new workers.
vii. Cost of training to new workers.
viii. Cost of tools and machine break down due to faulty handling by new workers.
ix. Cost of extra scrap and defective work of new workers.
5. Control of Labour Turnover:
It is true that labour turnover resulting from unavoidable causes cannot be controlled. But the labour turnover arising from avoidable causes can be controlled through certain measures.
The measures that should be taken for minimising the excessive labour turnover are:
1. Proper method of selection of workers should be adopted so that there can be right man for the right job, and there can be job satisfaction for the workers.
2. Adequate and proper training should be provided to new workers.
3. Good working conditions should be provided.
4. An adequate and satisfactory wage system should be introduced.
5. Incentive wage system should be introduced.
6. The hours of work should be reasonable.
7. Welfare services like medical facilities, recreation facilities, subsidised canteen services, education facilities, housing facilities, etc., should be provided.
8. Gratuity, provident fund, family pension, etc. should be provided.
9. Security of job should be assured to the workers.
10. Fair and uniform treatment should be meted out to all the workers.
11. There should be a satisfactory policy of transfers and promotions of employees.
12. Labour participation in management should be encouraged.
13. Good suggestions from employees should be welcomed or instituted.
6. Treatment of Cost of Labour Turnover:
The preventive cost of labour turnover should be apportioned to various departments on the basis of number of workers in each department.
Regarding the replacement costs, if the replacement is due to the fault of a particular department, it should be directly charged to that department. If Labour turnover is due to the defective management policy, the replacement cost should be apportioned to various departments on the basis of number of workers in each department.