Staff Retention and Labour Turnover

Key measures of HR Performance:

• Labour turnover and Staff retention: Percentage of staff who during a period

• Labour productivity: Output per employee

• Absenteeism: Percentage of staff who are absent from work

Employee retention:

• All businesses lose staff

  • Retirement/Maternity/Death/Long-term illness

  • Unsuitability

  • Changes in strategy (e.g closure of location)

• Labour turnover needs to be managed if the business is to succeed

• Employee retention= the ability of a business to convince its employees to remain with the business

What is labour turnover?

• The percentage of the workforce (employees) that leave a business within a given period (usually a year)

Labour turnover formula:

Number of employees leaving during the period/Average number employed during period x 100

Problems of high staff turnover:

• Higher costs

  • Increased recruitment and training costs

• Increased pressure on remaining staff

• Disruption to production/productivity

• Harder to maintain the required standards of quality and customer service

Factors that affect staff turnover:

• Type of business

  • Some businesses have seasonal staff turnover (e.g. holiday parks)

  • Some businesses employ many temporary staff (e.g. hotels)

• Pay and other rewards

• Working conditions

• Opportunities for promotion

• Competitor actions

• Quality of communication in business

• Economic conditions:

  • Downturn often leads to lower staff turnover

  • Buoyant economy- staff more likely to leave

• Labour mobility:

  • How transferable are staff skills

  • What other jobs are available?

• Employee loyalty

Ways to improve staff turnover:

• Effective recruitment and training

  • Recruit the right staff

  • Do all you can to keep the best staff (role for training and other motivation tools)

• Provide competitive pay and other incentives

  • Competitive pay levels and non-financial benefits

• Job enrichment

• Reward staff loyalty

  • Service awards, extra holiday etc