● its significance;
● methods of measurement;
● the reasons for turnover;
● what it costs;
● its incidence;
● how to benchmark rates of turnover.
The significance of labour turnover
The point was made by IRS (2000) that ‘rates of labour turnover provide a graphic
illustration of the turbulence within an organization. High rates of attrition can desta-
bilize a business and demotivate those who attempt to maintain levels of service and
output against a background of vacant posts, inexperienced staff and general discon-
tent.’ Obviously recruitment, induction and training costs all rise with an increase in
labour turnover. As the CIPD (2000) has commented, ‘Turnover may be a function of
negative job attitudes, low job satisfaction, combined with an ability to secure
employment elsewhere, ie the state of the labour market. On the other hand, turnover
is a normal part of organizational functioning, and while excessively high turnover
may be dysfunctional, a certain level of turnover is to be expected and can be benefi-
cial to an organization.’
Methods of measurement
There are a number of ways of measuring labour turnover, as described below.
The labour turnover index
The labour turnover index (sometimes referred to as the employee or labour wastage
index) is the traditional formula for measuring wastage. It has been described by the
CIPD (2000) as the ‘crude wastage method’. It is calculated as follows:
Number of leavers in a specified period (usually 1 year) × 100
Average number of employees during the same periodThis method is commonly used because it is easy to calculate and to understand. For
human resource planning purposes, it is a simple matter to work out that if a
company wants to increase its workforce by 50 people from 150 to 200, and the labour
turnover rate is 20 per cent (leading to a loss of 30 people), then if this trend
continues, the company would have to recruit 90 employees during the following
year in order to increase and to hold the workforce at 200 in that year (50 extra
376 ❚ People resourcing