Meaning of labour turnover
Labour turnover, also known as employee turnover, refers to the rate at which employees leave a company and are replaced by new employees over a specific period. High labour turnover can indicate problems within the company, such as low job satisfaction, poor working conditions, or inadequate compensation. Conversely, low turnover might suggest that employees are satisfied and the work environment is stable.
Problems of high turnover
- Increased recruitment and training costs
- Loss of experienced and skilled employees
- Decreased productivity and efficiency
- Lower employee morale and motivation
- Disruption of team dynamics and work processes
Calculation of labour turnover
Labour turnover rate = Number of employees leaving during the period/ Total number of staff X 100
Alternate formula:
Labour turnover rate = Number of employees leaving during the period/ Average number of employees during the period X 100
For example, if 20 employees left during the year in a company where 120 people are employed, the labour turnover rate would be 16.6 %.
Reasons why employees leave their jobs
- Lack of career growth and development opportunities
- Inadequate compensation and benefits
- Poor management or leadership
- Unhealthy work-life balance
- Better job offers elsewhere
- Poor workplace culture or environment
- Lack of recognition and appreciation
- Job dissatisfaction or lack of engagement
Multiple Choice Questions
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What is labour turnover?
A) The rate at which employees are promoted within a company
B) The rate at which employees leave and are replaced in a company
C) The rate at which new employees are hired in a company
D) The rate at which employees receive training in a company
Explanation: Labour turnover is the rate at which employees leave and are replaced in a company.
Which of the following is a formula to calculate labour turnover?
A) (Number of employees hired during a period / Total number of employees) × 100
B) (Number of employees promoted during a period / Total number of employees) × 100
C) (Number of employees leaving during a period / Average number of employees during the period) × 100
D) (Number of training sessions conducted / Total number of employees) × 100
Explanation: Labour turnover is calculated as (Number of employees leaving during a period / Average number of employees during the period) × 100.
Which of the following is NOT a reason for high labour turnover?
A) Poor management or leadership
B) Lack of career growth opportunities
C) High employee morale and motivation
D) Inadequate compensation and benefits
Explanation: High employee morale and motivation is not a reason for high labour turnover.
Which of the following best describes the impact of high labour turnover on a company?
A) Increased productivity and efficiency
B) Lower recruitment and training costs
C) Disruption of team dynamics and work processes
D) Higher employee morale
Explanation: High labour turnover can disrupt team dynamics and work processes.
If a company has 300 employees at the beginning of the year and 350 employees at the end of the year, and 50 employees left during that year, what is the labour turnover rate?
A) 15.38%
B) 12.5%
C) 14.3%
D) 16.7%
Explanation: The labour turnover rate is calculated as (Number of employees leaving / Average number of employees) × 100 = (50 / 325) × 100 = 15.38%.
Which of the following could be a sign of low labour turnover in a company?
A) Frequent hiring of new employees
B) High employee engagement and satisfaction
C) Constant job vacancies
D) Regular exit interviews
Explanation: High employee engagement and satisfaction is a sign of low labour turnover.
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