Labour Turnover & Retention

Labour Turnover Rates

Human resources managers need to analyse data to understand their employees’ performance. Human resources managers use calculations to analyse data about labour turnover, retention, productivity, and costs.

Labour turnover

Labour turnover refers to the percentage of staff that leaves the business per year. Retention refers to the percentage of staff that stays at the business per year.

Calculating labour turnover

Labour turnover is expressed as a percentage. It is calculated using the following formula:
- Labour turnover = (Total number of staff leaving ÷ Average number of total staff) × 100
To calculate the average number of total staff, use the following formula:
- Average number of total staff = (Number of staff at the beginning of the year + Number of staff at the end of the year) ÷ 2

Example of calculating labour turnover

For example, in January 2017 a business employs 100 staff and in December 2017 the business employs 90 staff. During the year, 10 of these staff left.
- Total number of staff leaving the business is 10.
- The average number of employees throughout this time is calculated by adding the number of staff at the beginning of the year with the number of staff at the end of the year and dividing by two. 100 employees at the beginning of the year plus 90 employees at the end of the year equals 190 employees, divided by 2, equals an average of 95 employees.
- Therefore, 10 staff leaving divided by 95 average staff multiplied by 100 gives 10.53% labour turnover. 10.53% of the business’ staff left during the period of one year.

Labour turnover percentage

The higher the labour turnover percentage, the higher the number of staff leaving during the period calculated. This could be because:
- If competitors offer higher wages and salaries, employees may leave.
- If employees are demotivated, they may leave.

Advantages and disadvantages of staff turnover rates

Low staff turnover means that experienced employees remain within the business.
Low staff turnover means that training and recruitment costs are low as there are fewer vacancies to be filled.
Low staff turnover means that there are fewer opportunities for the business to recruit new talent, skills, and ideas.

Retention Rates

When labour turnover is high, the number of employees leaving the business is high, which means that retention, the number of employees choosing to stay at the business, is low.

Calculating retention rates

Retention rates are expressed as a percentage. They are calculated using the following formula:
- Retention rates = (Total number of staff who worked at a business for the whole period of time ÷ Total number of staff at the beginning of the period of time) × 100

Example of calculating retention rates

For example, in December 2016, a business employs 90 staff. During the year, 15 of these staff left.
- Total number of staff leaving the business is 15.
- Total staff at the end of the year = 75.
- Total staff at the start of the year = 90.
- Staff at the end of the year ÷ staff at start of the year = 0.833.
- 0.833 X 100 = 83.33%.
A retention rate of 83.33% shows that the business retained 83.33% of its staff during the time period.

Causes of high retention rates

High retention rates could be because the business pays a higher salary or wage than its competitors.
- High retention rates could be because employees are motivated, empowered and valued.

1Business Organisation & Environment

1.1Introduction to Business Management

1.1.1Why Businesses Exist & Sectors

1.2Types of Organisation

1.2.1Sole Traders

1.2.2Limited Liability

1.2.3Non-Profit

1.2.4Franchising

1.2.5End of Topic Test - Franchising

1.3Organisational Objectives

1.3.1External Environments

1.3.2Business Mission & Corporate Objective

1.3.3Mission, Corporate Objectives & Strategy

1.3.4SWOT Analysis

1.3.5End of Topic Test - SWOT Analysis

1.4Stakeholders

1.4.1Stakeholders

1.5External Environment

1.5.1Social & Technological Environment

1.5.2Lifestyle & Technological Environment

1.5.3Corporate Social Responsibility

1.5.4Economic Environment

1.5.5Political & Legal Change

1.6Growth & Evolution

1.6.1Growth & Retrenchment

1.6.2Challenges of Growth

1.6.3Growth Models

1.6.4End of Topic Test - Diseconomies of Scale

1.6.5Internationalisation

1.6.6Sourcing Resources & Entering Markets

1.6.7End of Topic Test - Internationalisation

1.6.8Managing Internationalisation

1.6.9Impact of Internationalisation

1.7HL Only: Organisational Planning Tools

1.7.1Organisational Planning Tools

2Human Resource Management

2.1Functions & Evolution of Human Resource Management

2.1.1Setting Human Resource Objectives

2.1.2Human Resource Management

2.1.3Labour Turnover & Retention

2.1.4Labour Productivity

2.2Organisational Structure

2.2.1Organisational Structures

2.3Leadership & Management

2.3.1Managers

2.3.2Management Theories

2.3.3End of Topic Test - Management

2.4Motivation

2.4.1Motivating & Engaging Employees

2.4.2Taylor's Theory

2.4.3Maslow's Theory

2.4.4Herzberg's Theory

2.4.5Different Incentives

2.4.6Evaluating Incentives

2.5Organisational (Corporate) Culture

2.5.1Managing Organisational Culture

2.5.2Organisational Structures

2.6HL Only: Industrial/Employee Relations

2.6.1Improving Employer-Employee Relations

2.6.2Case Study - The Winter of Discontent

3Finance & Accounts

3.1Sources of Finance

3.1.1Internal Sources of Finance

3.1.2External Sources of Finance

3.1.3Factors for Financing

3.1.4End of Topic Test - Debt

3.2Costs & Revenues

3.2.1Costs & Revenues

3.3Break-Even Analysis

3.3.1Profit

3.3.2Break-Even Analysis

3.4Profitability & Liquidity Ratio Analysis

3.4.1Profitability Analysis

3.5Cash Flow

3.5.1Cash Flow

3.5.2Solutions to Cash Flow Problems

3.5.3Improving Cash Flow & Profits

3.6HL Only: Investment Appraisal

3.6.1Investment Appraisal

3.7HL Only: Budgets

3.7.1Cash-Flow & Budgets

4Marketing

4.1The Role of Marketing

4.1.1Setting Marketing Objectives

4.1.2Market Calculations

4.2Marketing Planning

4.2.1Marketing Mix

4.2.2Segmentation

4.2.3Niche & Mass Markets

4.3Market Research

4.3.1Market Research

4.3.2Market Mapping

4.3.3Methods of Market Research

4.4The 4 Ps

4.4.1Product Decisions

4.4.2Pricing Decisions & Price Skimming

4.4.3Pricing Decisions & Price Penetration

4.4.4End of Topic Test - Pricing & Competition

4.4.5Promotional Decisions

4.4.6Promotional Decisions 2

4.4.7Promotional Decisions 3

4.4.8Digital Marketing

4.4.9Evaluating Digital Marketing

4.4.10Case Study - The Marketing Mix & Promotion

4.4.11Place & Distribution

4.5HL Only: The Extended Marketing Mix

4.5.1The Extended Marketing Mix

4.6HL Only: International Marketing

4.6.1International Marketing

4.7E-Commerce

4.7.1E-Commerce

5Operations Management

5.1The Role of Operations Management

5.1.1Setting Operational Objectives

5.2Production Methods

5.2.1Production Processes Overview

5.2.2Production Processes

5.2.3Production Efficiency

5.2.4Technology & Production

5.3HL Only: Lean Prodution & Quality Management

5.3.1Importance of Quality

5.3.2Measuring & Identifying Quality

5.3.3Total Quality Management

5.3.4Evaluating Total Quality Management

5.3.5Case Study - Toyota Production System

5.4HL Only: Production Planning

5.4.1Capacity

5.4.2Productivity & Efficiency

5.4.3Technology & Efficiency

5.4.4Improving the Supply Chain

5.4.5Inventory

5.4.6Outsourcing

5.5HL Only: Research & Development

5.5.1Organisational Planning Tools

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