After reading this article you will learn about:- 1. Introduction, Definition and Calculation of Labour Turnover 2. Causes of Labour Turnover 3. Cost 4. Methods to Reduce.

Introduction, Definition and Calculation of Labour Turnover:

Labour turnover refers to the movement of workers into and out of an organisation. Labour turnover has been a subject of manager concern and scholarly study for atleast half a century because labour turnover rate is an index of the stability of workforce in an organization.

Labour turnover may be defined as the time-to-time changes in the number of the work force that result from the hiring, release and replacement of employees. The simplest measure of labour turnover is the separation rate, generally defined as the number of separations per month per hundred of the average working force. Separations include all quits, lay-offs and discharges.

Assume an average working force of 1000 employees for a month. If during this period 100 em­ployees had severed their relationship with the concern, then

The formula for calculating labour turn-over as given by equation (a) above has certain limitations:

(i) It does not take seasonality into account.



(ii) It does not differentiate among the causes for labour turnover.

In order to overcome these limitations, current practice makes use of Refined net labour turnover rate which is the ratio of the avoidable separations to the average working forces (per hundred). The formula is

Where TR is the refined net labour turn-over rate.


S is the total separations.

U is the unavoidable separations.

W is the average workforce for the period.

Causes of Labour Turnover:

(a) Voluntary Withdrawals (By the Worker) Due to:


i. Dislike for the present job;

ii. Better job available elsewhere;

iii. Conditions at home;

iv. Ill-health;


v. Poor working conditions;

vi. Bad treatment from the boss;

vii. Lower wages and excessive hours of work;

viii. Job being hard and hazardous;


ix. Poor training and induction;

x. Dirty politics prevalent in the industry;

xi. Partiality in making promotions and transfers and due to,

xii. Ineffective and inefficient management.


(b) Lay-offs due to seasonal nature of industry, shortage of power, fuel, raw material, etc.

(c) Discharges due to undesirable activities of the employees, insubordination or they being found unsuitable for the job.

(d) Retirement.

(e) Death.

Cost of Labour Turnover:

Excessive labour turnovers are undesirable and expensive, because the expense of training new recruits is usually a significant aspect of production costs and voluntary withdrawal by employees (is undesirable as it) produces an unfavourable and disheartening impression on the existing employees.

When an employee leaves a concern, such costs as the following are usually involved:


(i) Hiring costs, involving time and facilities for recruitment, interviewing etc.

(ii) Training cost, involving time of foreman, personnel department, etc.

(iii) Exploring other sources of labour supply.

(iv) Payment to a recruit in excess of what he produces.

(v) Accidents and damage to machinery by new recruits.

(vi) Cost of work spoiled by new recruits.


(vii) Loss of production during the period between the separation of old worker and the replacement by the new one.

(viii) Production machines not being used to their maximum capacity during the hiring interval.

(ix) Extra over-time paid to remaining workers.

(x) Cost of not meeting delivery dates.

Methods to Reduce Labour Turnover:

The best method to reduce labour turnover is to study the causes of labour turn-over and then attempt to remove the reasonable factors that promote labour turnover.

A few methods to reduce labour turnover are:


(i) Improve factory working conditions.

(ii) Handle worker’s grievances faithfully.

(iii) Do not abuse and fire workers for petty matters,

(iv) Try to minimize fluctuations in the work load.

(v) Give appropriate wages and incentives to the workers.

(vi) In matters of hours of work compensation, disputes, etc., go by the appropriate Labour Laws.


(vii) Take care of employee’s health and welfare.

(viii) Adopt safety and good housekeeping practices.

(ix) Motivate the employees and try to high up their morale.

(x) Be impartial in the matters of promotion and transfers.