Labour Turnover (DP IB Business Management)

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Labour Turnover

Labour turnover measures the proportion of employees leaving a business during a specific time period
It is expressed as a percentage and is calculated using the formula

$Labour Turnover = \frac{Number of Staff Leaving}{Total Number of Staff} \times 100$

Internal and external factors that affect labour turnover

A rising rate of labour turnover can signal internal human resource management problems such as
- Poor management leading to workers losing commitment
- A poor recruitment and selection approach leading to staff leaving soon after starting their job
- Low wage levels compared to those that could be earned elsewhere
External factors can also increase labour turnover in a business
- A buoyant local economy where workers are attracted to employment opportunities elsewhere
- Improved transport links that provide an opportunity for workers to seek work across a wider geographical area

The Consequences of high Labour Turnover

Problems	Opportunities
Increased recruitment and selection costs Increased induction and training costs Lower productivity levels as workers settle into new roles	Workers with existing skills can be recruited to reduce the need for training New ideas and creativity introduced to the business New perspective and approaches to problem-solving can improve business performance

Problems

Opportunities

Increased recruitment and selection costs

Increased induction and training costs

Lower productivity levels as workers settle into new roles

Workers with existing skills can be recruited to reduce the need for training

New ideas and creativity introduced to the business

New perspective and approaches to problem-solving can improve business performance

Worked Example

In 2022 Domus Construction Ltd employed 7,200 workers, six per cent of whom worked at the head office.

During 2022 fifty-four head office employees left the business.

Calculate the labour turnover of Domus Construction's head office in 2022. (3 marks)

Step 1: Calculate the number of head office workers

0.06 x 7,200 = 432 workers (1 mark)

Step 2: Apply the labour turnover formula

$Labour Turnover = \frac{Number of Staff Leaving}{Total Number of Staff} \times 100 Labour Turnover = \frac{54}{432} = 0.125 \times 100 = 12.5 %$

(2 marks)

Labour retention

Labour retention measures the proportion of employees remaining with a business during a specific time period
It is expressed as a percentage and is calculated using the formula

$Labour Retention = \frac{Number of Staff Remaining}{Total Number of Staff} \times 100$
A high level of labour retention means that few staff are leaving the business during a given period

Worked Example

In 2022 Westington College employed 4,240 employees, 265 of whom left the college during the year

Calculate Westington College's staff retention rate in 2022 (2 marks)

Step 1: Calculate the number of employees not leaving

4,240 - 265 = 3,975 (1 mark)

Step 2: Calculate the retention rate using the formula

$Labour Retention = \frac{Number of Staff Remaining}{Total Number of Staff} \times 100 Labour Retention = \frac{3, 975}{4, 240} = 0.9375 \times 100 = 93.75 %$ (1 mark)

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Labour Turnover (DP IB Business Management)

Revision Note

Labour Turnover

Internal and external factors that affect labour turnover

Worked Example

Labour retention

Worked Example

Author: Lisa Eades