Labour Turnover | Cost Accounting - B Com PDF Download

 Page 1


LABOUR TURNOVER
Introduction:
Labour Turnover is a serious problem of industry in all countries. It is a major problem in the
area of industrial relations in India. In every organisation employees constantly join and leave for
one reason or other. The relation between the number of persons joining the organisation and
leaving due to resignation, retirement or retrenchment to the average number of pay-roll is
labour turnover. The labour turnover is caused by several factors, some may be controllable
and some may not be controllable. Labour turnover may prove to be a costly process. This
turnover is harmful to the efficiency of worker and impairs the quality of production. Labour
turnover is a serious obstacle to the full utilisation of country’s human and material resources.
High Labour turnover is not desirable as it affects both employers and workers adversely.
Meaning of Labour Turnover:
Labour turnover refers to the rate of change in the working staff of an enterprise during a
Page 2


LABOUR TURNOVER
Introduction:
Labour Turnover is a serious problem of industry in all countries. It is a major problem in the
area of industrial relations in India. In every organisation employees constantly join and leave for
one reason or other. The relation between the number of persons joining the organisation and
leaving due to resignation, retirement or retrenchment to the average number of pay-roll is
labour turnover. The labour turnover is caused by several factors, some may be controllable
and some may not be controllable. Labour turnover may prove to be a costly process. This
turnover is harmful to the efficiency of worker and impairs the quality of production. Labour
turnover is a serious obstacle to the full utilisation of country’s human and material resources.
High Labour turnover is not desirable as it affects both employers and workers adversely.
Meaning of Labour Turnover:
Labour turnover refers to the rate of change in the working staff of an enterprise during a
given period of time. Labour turnover is a measurement of the extent to which old employees leave
and new employees enter into the services of an organisation in a specific time period. Labour or
employees who are not satisfied with their career in the present organisation may seek suitable
employment in other organisations. Labour turnover may result into movements, shifting or
migration of employees (or) workers from one unit to another or from one industry to other.
Measurement of Labour Turnover:
Labour turnover can be measured either by Accession rate or by separation rate. If the
number of employees working in the organisation remains the same, the separation rate is equal to
accession rate. If the number of persons in the organisation is increasing, accession rate will be
greater than the separation rate. If the employment is decreasing, the separation rate will be
greater than accession rate. The term accession means, the total number of employees (or)
workers added to the employment during the period (i.e., additions to the pay-roll). The term ‘
separation’ implied severance of employment at the instance of the employees (workers) a
employer (i.e. quits discharges, retirements, deaths etc), replacements (i.e. one accession plus
separation) and average work force i.e., the number at the begining of a period plus the number
at the end of the period divided by 2.
Total Accessions in the Year
Accession Rate = x 100
Average number of employees for the year
Total separations in the Year
Separation Rate = x 100
Average number of employees for the year
TotalAccessions per year + Total separation per year
Composite Rate = x 100
Average number of employees for the year
Example: In Arun Ltd. the average work force per month is 2000 and there are 40 accessions and
50 separations during that period.
40
Accession Rate = x 100 = 2 percent
2000
50
Separation Rate = x 100 = 2.5 percent
2000
Page 3


LABOUR TURNOVER
Introduction:
Labour Turnover is a serious problem of industry in all countries. It is a major problem in the
area of industrial relations in India. In every organisation employees constantly join and leave for
one reason or other. The relation between the number of persons joining the organisation and
leaving due to resignation, retirement or retrenchment to the average number of pay-roll is
labour turnover. The labour turnover is caused by several factors, some may be controllable
and some may not be controllable. Labour turnover may prove to be a costly process. This
turnover is harmful to the efficiency of worker and impairs the quality of production. Labour
turnover is a serious obstacle to the full utilisation of country’s human and material resources.
High Labour turnover is not desirable as it affects both employers and workers adversely.
Meaning of Labour Turnover:
Labour turnover refers to the rate of change in the working staff of an enterprise during a
given period of time. Labour turnover is a measurement of the extent to which old employees leave
and new employees enter into the services of an organisation in a specific time period. Labour or
employees who are not satisfied with their career in the present organisation may seek suitable
employment in other organisations. Labour turnover may result into movements, shifting or
migration of employees (or) workers from one unit to another or from one industry to other.
Measurement of Labour Turnover:
Labour turnover can be measured either by Accession rate or by separation rate. If the
number of employees working in the organisation remains the same, the separation rate is equal to
accession rate. If the number of persons in the organisation is increasing, accession rate will be
greater than the separation rate. If the employment is decreasing, the separation rate will be
greater than accession rate. The term accession means, the total number of employees (or)
workers added to the employment during the period (i.e., additions to the pay-roll). The term ‘
separation’ implied severance of employment at the instance of the employees (workers) a
employer (i.e. quits discharges, retirements, deaths etc), replacements (i.e. one accession plus
separation) and average work force i.e., the number at the begining of a period plus the number
at the end of the period divided by 2.
Total Accessions in the Year
Accession Rate = x 100
Average number of employees for the year
Total separations in the Year
Separation Rate = x 100
Average number of employees for the year
TotalAccessions per year + Total separation per year
Composite Rate = x 100
Average number of employees for the year
Example: In Arun Ltd. the average work force per month is 2000 and there are 40 accessions and
50 separations during that period.
40
Accession Rate = x 100 = 2 percent
2000
50
Separation Rate = x 100 = 2.5 percent
2000
Principles of Personnel Management
(40 + 50)/2
Composite Rate = x 100
2000
45
= x 100 = 2.25 percentage.
2000
Causes for Labour Turnover:
Employees may leave the organisation on their own interest or they are discharged. The
causes for Labour turnover may be classified as controllable (avoidable) and uncontrollable
(unavoidable). A high rate of labour turnover is undesirable and there is need to study the various
causes for labour turnover.
Controllable Causes (Avoidable Causes):
Among the controllable causes redundancy is the most important due to the seasonal nature
of the trade or Industry, shortage of materials, lack of proper manpower, recruitment and promotion
LABOUR TURNOVER
Employee related causes Employer related causes
Controllable
(Avoidable)
Uncontrollable
(Unavoidable)
Controllable
(Avoidable)
Uncontrollable
(Unavoidable)
In efficiency.
Laziness.
Lack of Interest
in work.
low wages.
In subordina-
tion.
Desire for a job
near home.
Retirements
Death
Ill-health
Accidents
Lack of proper
man power
planning.
Poor promotion
policy.
Poor working
conditions.
Unfair
supervision
Seasonal
business.
Surplus
employment.
Problem of
Mechanisation
Page 4


LABOUR TURNOVER
Introduction:
Labour Turnover is a serious problem of industry in all countries. It is a major problem in the
area of industrial relations in India. In every organisation employees constantly join and leave for
one reason or other. The relation between the number of persons joining the organisation and
leaving due to resignation, retirement or retrenchment to the average number of pay-roll is
labour turnover. The labour turnover is caused by several factors, some may be controllable
and some may not be controllable. Labour turnover may prove to be a costly process. This
turnover is harmful to the efficiency of worker and impairs the quality of production. Labour
turnover is a serious obstacle to the full utilisation of country’s human and material resources.
High Labour turnover is not desirable as it affects both employers and workers adversely.
Meaning of Labour Turnover:
Labour turnover refers to the rate of change in the working staff of an enterprise during a
given period of time. Labour turnover is a measurement of the extent to which old employees leave
and new employees enter into the services of an organisation in a specific time period. Labour or
employees who are not satisfied with their career in the present organisation may seek suitable
employment in other organisations. Labour turnover may result into movements, shifting or
migration of employees (or) workers from one unit to another or from one industry to other.
Measurement of Labour Turnover:
Labour turnover can be measured either by Accession rate or by separation rate. If the
number of employees working in the organisation remains the same, the separation rate is equal to
accession rate. If the number of persons in the organisation is increasing, accession rate will be
greater than the separation rate. If the employment is decreasing, the separation rate will be
greater than accession rate. The term accession means, the total number of employees (or)
workers added to the employment during the period (i.e., additions to the pay-roll). The term ‘
separation’ implied severance of employment at the instance of the employees (workers) a
employer (i.e. quits discharges, retirements, deaths etc), replacements (i.e. one accession plus
separation) and average work force i.e., the number at the begining of a period plus the number
at the end of the period divided by 2.
Total Accessions in the Year
Accession Rate = x 100
Average number of employees for the year
Total separations in the Year
Separation Rate = x 100
Average number of employees for the year
TotalAccessions per year + Total separation per year
Composite Rate = x 100
Average number of employees for the year
Example: In Arun Ltd. the average work force per month is 2000 and there are 40 accessions and
50 separations during that period.
40
Accession Rate = x 100 = 2 percent
2000
50
Separation Rate = x 100 = 2.5 percent
2000
Principles of Personnel Management
(40 + 50)/2
Composite Rate = x 100
2000
45
= x 100 = 2.25 percentage.
2000
Causes for Labour Turnover:
Employees may leave the organisation on their own interest or they are discharged. The
causes for Labour turnover may be classified as controllable (avoidable) and uncontrollable
(unavoidable). A high rate of labour turnover is undesirable and there is need to study the various
causes for labour turnover.
Controllable Causes (Avoidable Causes):
Among the controllable causes redundancy is the most important due to the seasonal nature
of the trade or Industry, shortage of materials, lack of proper manpower, recruitment and promotion
LABOUR TURNOVER
Employee related causes Employer related causes
Controllable
(Avoidable)
Uncontrollable
(Unavoidable)
Controllable
(Avoidable)
Uncontrollable
(Unavoidable)
In efficiency.
Laziness.
Lack of Interest
in work.
low wages.
In subordina-
tion.
Desire for a job
near home.
Retirements
Death
Ill-health
Accidents
Lack of proper
man power
planning.
Poor promotion
policy.
Poor working
conditions.
Unfair
supervision
Seasonal
business.
Surplus
employment.
Problem of
Mechanisation
Centre for Distance Education
policies. The other controllable causes are employees dissatisfaction with the job, low wages,
hours of work and work conditions and bad relations with supervisors and fellow workers.
Uncontrollable Causes (unavoidable causes):
Labour turnover also arises due to certain reasons which are beyond the control of
management. Employees may leave the organisation because of the following uncontrollable causes.
i) Better Job opportunities outside the organisation
ii) Retirement, death etc.
iii) Ill health, accident etc.
iv) Unsuitable Job (or) Misconduct on his part.
v) Shifting from the locality
vi) Personal affairs like marriage or pregnancy in case of female workers.
vii) Lack of proper housing or transport facilities.
The causes of labour turnover may be ascertained through personal interview with the
employees leaving the organisation and opinion poll or survey of the employees by independent
persons. The causes may be known from the friends of the employees leaving the organisation, with
whom they are very frank.
Evil Effects of Labour Turnover:
A high rate of labour turnover is a great handicap to the workers and employer. Some
amount of labour turnover is rather inevitable and natural. Such type of labour turnover arises on
account of retirement of old employees and accession of fresh blood. Turnover of this type is very
small in all organisations. In most of the causes turnover arises on account of resignations and
dismissals. Such type of Labour turnover proves to be very harmful. The loss to the workers is
distinct and loss to the employer is still greater.
Effects of Labour turnover
Workers (Employees)
i) Loss of earnings
ii) Loss of promotional opportunity
iii) New environment
iv) Loss of skills relating to job (efficiency)
v) Trade Union growth is affected
Employer
i) High cost of recruitment
ii) Trainig cost will increase
iii) Loss of production
iv) Overtime cost
v) Excess depreciation of machinery
vi) Market reputation suffers.
Page 5


LABOUR TURNOVER
Introduction:
Labour Turnover is a serious problem of industry in all countries. It is a major problem in the
area of industrial relations in India. In every organisation employees constantly join and leave for
one reason or other. The relation between the number of persons joining the organisation and
leaving due to resignation, retirement or retrenchment to the average number of pay-roll is
labour turnover. The labour turnover is caused by several factors, some may be controllable
and some may not be controllable. Labour turnover may prove to be a costly process. This
turnover is harmful to the efficiency of worker and impairs the quality of production. Labour
turnover is a serious obstacle to the full utilisation of country’s human and material resources.
High Labour turnover is not desirable as it affects both employers and workers adversely.
Meaning of Labour Turnover:
Labour turnover refers to the rate of change in the working staff of an enterprise during a
given period of time. Labour turnover is a measurement of the extent to which old employees leave
and new employees enter into the services of an organisation in a specific time period. Labour or
employees who are not satisfied with their career in the present organisation may seek suitable
employment in other organisations. Labour turnover may result into movements, shifting or
migration of employees (or) workers from one unit to another or from one industry to other.
Measurement of Labour Turnover:
Labour turnover can be measured either by Accession rate or by separation rate. If the
number of employees working in the organisation remains the same, the separation rate is equal to
accession rate. If the number of persons in the organisation is increasing, accession rate will be
greater than the separation rate. If the employment is decreasing, the separation rate will be
greater than accession rate. The term accession means, the total number of employees (or)
workers added to the employment during the period (i.e., additions to the pay-roll). The term ‘
separation’ implied severance of employment at the instance of the employees (workers) a
employer (i.e. quits discharges, retirements, deaths etc), replacements (i.e. one accession plus
separation) and average work force i.e., the number at the begining of a period plus the number
at the end of the period divided by 2.
Total Accessions in the Year
Accession Rate = x 100
Average number of employees for the year
Total separations in the Year
Separation Rate = x 100
Average number of employees for the year
TotalAccessions per year + Total separation per year
Composite Rate = x 100
Average number of employees for the year
Example: In Arun Ltd. the average work force per month is 2000 and there are 40 accessions and
50 separations during that period.
40
Accession Rate = x 100 = 2 percent
2000
50
Separation Rate = x 100 = 2.5 percent
2000
Principles of Personnel Management
(40 + 50)/2
Composite Rate = x 100
2000
45
= x 100 = 2.25 percentage.
2000
Causes for Labour Turnover:
Employees may leave the organisation on their own interest or they are discharged. The
causes for Labour turnover may be classified as controllable (avoidable) and uncontrollable
(unavoidable). A high rate of labour turnover is undesirable and there is need to study the various
causes for labour turnover.
Controllable Causes (Avoidable Causes):
Among the controllable causes redundancy is the most important due to the seasonal nature
of the trade or Industry, shortage of materials, lack of proper manpower, recruitment and promotion
LABOUR TURNOVER
Employee related causes Employer related causes
Controllable
(Avoidable)
Uncontrollable
(Unavoidable)
Controllable
(Avoidable)
Uncontrollable
(Unavoidable)
In efficiency.
Laziness.
Lack of Interest
in work.
low wages.
In subordina-
tion.
Desire for a job
near home.
Retirements
Death
Ill-health
Accidents
Lack of proper
man power
planning.
Poor promotion
policy.
Poor working
conditions.
Unfair
supervision
Seasonal
business.
Surplus
employment.
Problem of
Mechanisation
Centre for Distance Education
policies. The other controllable causes are employees dissatisfaction with the job, low wages,
hours of work and work conditions and bad relations with supervisors and fellow workers.
Uncontrollable Causes (unavoidable causes):
Labour turnover also arises due to certain reasons which are beyond the control of
management. Employees may leave the organisation because of the following uncontrollable causes.
i) Better Job opportunities outside the organisation
ii) Retirement, death etc.
iii) Ill health, accident etc.
iv) Unsuitable Job (or) Misconduct on his part.
v) Shifting from the locality
vi) Personal affairs like marriage or pregnancy in case of female workers.
vii) Lack of proper housing or transport facilities.
The causes of labour turnover may be ascertained through personal interview with the
employees leaving the organisation and opinion poll or survey of the employees by independent
persons. The causes may be known from the friends of the employees leaving the organisation, with
whom they are very frank.
Evil Effects of Labour Turnover:
A high rate of labour turnover is a great handicap to the workers and employer. Some
amount of labour turnover is rather inevitable and natural. Such type of labour turnover arises on
account of retirement of old employees and accession of fresh blood. Turnover of this type is very
small in all organisations. In most of the causes turnover arises on account of resignations and
dismissals. Such type of Labour turnover proves to be very harmful. The loss to the workers is
distinct and loss to the employer is still greater.
Effects of Labour turnover
Workers (Employees)
i) Loss of earnings
ii) Loss of promotional opportunity
iii) New environment
iv) Loss of skills relating to job (efficiency)
v) Trade Union growth is affected
Employer
i) High cost of recruitment
ii) Trainig cost will increase
iii) Loss of production
iv) Overtime cost
v) Excess depreciation of machinery
vi) Market reputation suffers.
Cost of Labour turnover to Employees:
High labour turnover is harm full to the employees in many respects:
i) On account of a change in service from one organisation to another, the workers are not able to
enjoy the various advantages (pay increment, leave, provident fund, pension, gratuity etc) of
continued employment in one concern.
ii) A worker (employee) who changes his job quite often looses the opportunity of promotion on the
basis of seniority.
iii) When worker joins new organisation, the special skills and experience relating to previous
employment is of no use and become meaningless.
iv) It is very difficult to worker to adjust with the new work environment when worker joins in a new
organisation.
v) Movement of workers from one organisation to another also affects the solidarity among them
adversely.
Costs to the Employer:
High labour turnover is costly to the employers in the following ways:
i) High labour turnover leads to high replacement costs to the employer, due to repeated recruitment,
selection and placement of employees.
ii) Results into more expenditure on orientation and training of workers.
iii) Loss of production in the time interval between separation of old employees and replacement by
new.
iv) Firm has to incur high over time costs to meet delivery schedules.
v) Output suffers both in quality as well as quantity.
vi) Scrap and waste rates increases due to inexperience of new workers.
vii) Due to lack of execution of orders in time, because of labour turnover the market reputation of the
company will suffer.
viii) Labour turnover leads to under utilisation of human resources of the country.
Measures to Control Labour Turnover:
Abnormal rate of labour turnover is bad both for the worker and the industry. Remedial
measures should be taken after ascertaining the exact reasons for leaving. Labour turnover may be
reduced by proper planning of manpower requirements so that it is not redundant. Other remedial
measures are:
i) Improvement in recruitment and practices
ii) Use of proper tests and interviews while selecting the personnel.
iii) Impartial promotion and transfer policies.
iv) Adequate training to the as well as existing employees.