ENT2/6: LABOUR TURNOVER

Labour turnover

Refers to the ratio of the number of employees that leave a company through attrition, dismissal or resignation during a period to the number of employees on payroll during the same period.

Or refers to the number of employees moving in and out of the business

Causes of the high labour turnover in Uganda

• Inadequate wages leading to workers moving to competitors
• Sexual harassment of workers by bosses
• Low levels of motivation/poor morale
• Promotion prospects in other businesses
• Recruiting and selecting of wrong employees
• Delayed payment of workers’ salaries
• Communication gaps which leads to poor relationship between employees and employers
• Disrespect of employees by bosses
• Transfers caused by marriage
• Excessive work load to workers

Costs of labour turn over

• it leads to additional recruitment costs
• Low productivity
• Increased costs of training and replacement of workers
• It lowers business’s performance
• Loss of know-how and customer good will
• Potential loss of sales due to high turnover in the scale force
• Damage the morale and productivity to those workers remain in the enterprise
• Hiring costs
• Higher accident rates
• Underutilization of production facilities
• High rate of scrap and waste
• Over time pay is increased
• It lowers reputation of the enterprise which may make the business to lose its potential customers

Benefits of labour turn over

• New employees bring new skills, ideas, enthusiasm and contacts with them
• New employees are resistant to changes in most cases
• New employees are willing to accept lower pay rates
• New employees are excited about their new jobs and work harder to please management and clients
• Employee turnover allows for flexibility in the way the organisation is to run
• It allows management the opportunity to restructure departments and functions

Strategies to minimize employee turn over

• Engaging employees. This involves engaging, retaining and optimizing the value of employees to motivate them to stay in the organisation
• Increasing knowledge accessibility. The extent of the organization’s collaborativeness and its capacity for making knowledge and ideas widely available to employees to stay in the organisation. Sharing information should be made at all levels of management
• Optimizing workforce. This can be done through establishing essential processes for getting work done, providing good working conditions establishing accountability and many good hiring choices would retain employees in their organisation
• Empowering of employees. Superiors empowering subordinates by delegating responsibilities to them leads to subordinates who are more satisfied with their leader and consider them to be fair and in turn to perform up to the superior’s expectations
• Ensuring job involvement. This involves an individual’s ego involvement with work and indicates the extent to which an individual identifies psychologically with his / her job. Workers who have greater variety of tasks tend to stay in the job
• Employee training and development. Staff training and development refers to the process programs and activities through which or organisation develops, enhances and improves the skills, competencies and overall performance of its employees and workers

METHOD OF CALCULATING LABOUR TURNOVER

 Separation method. This method takes into account those workers who have left during a particular period. Its formula is

Replacement method. This method takes into account only those workers who have joined in place of those who have left. The formula

Additional method.  Under this method, number of employees added during a particular period is taken into consideration for computing the labor turnover. The method of computing is as follows.

During October 2007, the following information is obtained from the personnel department of a manufacturing company

Labour force at the beginning of the month 1,900 and at the end of the month 2100.

During the month, 25 people left while 40 persons were discharged. 280 workers were engaged out of which only 30 were appointed in the vacancy created by the number of workers separated and the rest on account of expansion scheme. Calculate the labour turnover by different methods.

Example two.

From the following information, calculate labour turn over using the following methods

1. Separation method
2. Replacement method
3. Flux method

Number of workers at the beginning 800

Number of workers at the end 1,700

During the year, 12 workers left and 89 workers were discharged. The company recruited 1,000 workers and of these 70 were to fill the vacancies of those leaving, while the rest were engaged for an expansion scheme

Average number of workers =