Labour turnover, the total movement of employees in and out of an organisation is one of the classic measures of HR effectiveness. Average labour turnover in the UK is currently 15.7% and voluntary labour turnover ? employees resigning ? makes up about two-thirds of this total. This element, in particular, represents a major cost for employers. The Economist, for example, has estimated that each leaver who has to be replaced incurs an extra cost of between half and one and a half times their salary. It represents a major cost to employers. So controlling and measuring labour turnover is important. In this short introductory article HR Advantage consultant Simona Policicchio establishes some of the key issues.
Measuring labour turnover
Labour turnover should be measured on a regular basis to identify problems, assist human resource planning and help assess the success of any measures taken to reduce turnover. The simplest measure involves calculating the number of leavers in a period (usually a year) as a percentage of the number employed during the same period. This is known as the separation rate or crude wastage rate and is expressed as follows: Number of leavers / average number of employed x 100.
Patterns of labour turnover
The biggest proportion of leavers tends to be among those who have recently joined an organisation. Longer serving employees are more likely to stay, often because they become used to the work and the organisation and have an established relationship with those around them.
Costing employee turnover
The costs of labour turnover could potentially encompass the following: cost of replacing the leaver (e.g. recruitment advertising; agency fees); transition costs (e.g. agency staff to cover for the vacant post, and/or overtime payments to existing staff to provide cover) and work-related costs (e.g. lost sales; reduced customer-care levels).
What information do employers measure?
Recent research has shown that most employers (99%) that collect labour turnover data include resignations, but that they are also interested in counting several other reasons, including: dismissal (90%); normal retirement (82%); ill-health retirements (79%) and death in service (72%). However, only 10% are interested in other types of leaver and only 30% collect data on transfers and staff moves within their own organisations.
Improving employee retention
Rates of labour turnover measure the loss of members of staff but they do not show the specific reasons for staff losses beyond broad categories such as resignation or dismissal. These statistics really need to be supplemented by insights about the motives for this turnover, such as remuneration, difficulty with the work etc.
This information can be provided by the use of exit interviews, confidential attitude surveys (which include questions to staff about their intention to leave) and questionnaires sent to former employees on a confidential basis a few months after their departure.
The most effective methods
Overall, studies have found the following measures to be most effective in controlling labour turnover:
- improving the people skills of line managers
- improving recruitment processes
- offering flexible working
- changing induction practices
HR Advantage Viewpoint
It is important that employers have an understanding of their labour turnover rate and how this affects the organisation?s effectiveness.
Making sure that new joiners have realistic expectations of their job and receive sufficient induction training can help minimise the number of people leaving the organisation within the first six months of employment. Tools such as confidential exit surveys and staff attitude surveys can help managers understand why people leave the business.
Measuring the costs of labour turnover, is vital in building the business case for thorough and effective recruitment and retention initiatives.
If you have any questions or specific situations you would like to discuss, please email simona@hradvantage.co.uk
