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INTRODUCTION TO EMPLOYEE TURNOVER

In
IT INDUSTRY

There are some keys to win over the employees in an India Software
Company. The IT managers have forgotten those soft-skills and
techniques in the long-coarse of time. This is one of the reasons why
Software Companies faces high ratio of employee turnover in a firm.
The survey carried on Top Software Companies in India tells that the
employee dissatisfaction level has increased up to 27% in 2007. Most
of the employees complained that the pressure given by their boss
and dumping work-load in Software Outsourcing setting.

Now what worst could happen in Software Company, if the company


fails in delivering positive energy to the employees and cares less
about their employees. Such companies usually lack the motivation to
deliver to its worker due to ill-prospect manager in the firm. Most of
the managers find difficult to delegate the work to their employees.
They are not at fault perhaps, but even they are not talk to do the
same.

India Software Development needs to have an organized structure


and management so as to retain their employees for long-time.
Consolidations should not be only in the words, but all also action
performed by the IT Manager.

MEANING OF EMPLOYEE TURNOVER:


Employee turnover occurs when employees voluntarily leave their
jobs and must be replaced. Turnover is expressed as an annual
percentage of the total workforce. For example, 25 percent
employee turnover would mean that one-quarter of a company's
workforce at the beginning of the year has left by the end of the year.
Turnover should not to be confused with layoffs, which involve the
termination of employees at the employer's discretion in response to
business conditions such as reduced sales or a merger with another
company.

“Employee turnover has been defined as the rate of change


in the working staff of concern during the definite period”.

In other words, it signifies the shifting of work force into and out of
an organization. It is a major of extent to which old employees leave
and new employees enter into service in a given period. Employee
turnover is the cause and effect of instability of employment, apart
from being a major of the morale and efficiency or otherwise of
worker.

Therefore, it can be concluded that Employee turnover is a perpetual


concern for companies. Having to replace staff at regular interval can
be headache for a busy manager and the entire resource- shaping
circus of hiring and training new employee is one that company
scarcely look forward to.

FACTORS RELATED TO EMPLOYEE TURNOVER:


There are several factors which are related to employee turnover,
thus, as shown with the help of diagram as below:

The explanation of these factors related to Employee Turnover is as


under:

1. The Economy in this model, the overall economy sets the


stage for alternative employment opportunities. In a tight
economy, generally there are less alternative opportunities and
employees are less willing to leave their current jobs even if they
are dissatisfied.
2. Company culture is another strong determinant of turnover
intentions. Company culture is determined by a bunch of things
as skills, leadership, rewards/recognition, and communications.
3. Organizational Characteristics nested within an industry is
the specific organization. Within any industry, there are some
organizations that simply do a much better job of retaining
employees than others. Some of this has little to do with
enlightened practices and is simply a product of workforce
demographics. All things being equal, a younger workforce
will have more job and company changes than an older
workforce. Part-time personnel are less stable than full-time
personnel and a workforce with greater average tenure will have
fewer turnovers than a workforce with less average tenure.
4. Industry Trends the Health Care industry is a good example
of how industry trends interact with the general economy. With
managed health care has come an increased focus on
profitability and cost reduction, and rapid consolidation of
hospitals. This has created an atmosphere of uncertainty and
dissatisfaction for many health care professionals.

The current good economy offers career opportunities outside of


the industry and can increase the level of turnover that might
already occur. The net effect is that turnover is very high in this
industry and there is an increasing shortage of qualified
professionals.

5. Job Characteristics one of the most researched areas is the


relationship between job satisfaction and turnover. There is a
well documented body of research that suggests the following
job characteristics are most commonly associated with job
satisfaction:

∗ Variety - Jobs that offer a greater variety of tasks are


associated with higher satisfaction levels
∗ Autonomy - Jobs that offer greater freedom and choice in
execution (i.e., empowerment) are associated with higher
satisfaction levels
∗ Identity - Jobs that offer a sense of ownership and
personal accountability are associated with higher
satisfaction levels
∗ Feedback - Jobs that offer intrinsic feedback on quality of
performance are associated with higher satisfaction levels

Defining the Employee Turnover Problem:


Global outsourcing and the astounding amount of foreign direct
investment pouring into China, Russia, and India have created
tremendous opportunities and competition for talented IT
professionals in those countries. The downside of this increased
competition is a rising rate of turnover, particularly in India.
Almost every sector in India is facing high rates of turnover these
days. A recent study revealed that employees leave either because of
compensation reasons or due to better growth opportunities.

According to NASSCOM, Indian IT-ITES industry recorded US$ 39.6


billion in revenues in 2006-07. The revenue of US$ 49-50 billion has
been projected in 2007-08 at a growth rate of 24-27 per cent. The IT
industry's contribution to GDP was 4.8 per cent in 2005-06.
Though the IT/ITES sector is booming, it is constantly facing high
turnover rates of 25% - 30%. Even the big brands are also facing the
same problem.

Below are the details of turnover rates of various players in IT sector


shown with help of diagram:-
According to the survey conducted by BES and Data Quest, Sierra
Atlantic recorded highest turnover rate (29%) followed by Kanbay
with 25% and Accel Frontline with 20 per cent.
Turnover Rates of Major IT Players

To put these turnover numbers into perspective, if a company has 100


programmers and a turnover rate of 25%, then 25 of its IT staff will
leave each year. Think about the time and money it took to find,
interview, hire, train, and coach those 25 people. Now think about
losing them and starting the hiring and training processes anew.

How do the hiring and training processes break down in


terms of total costs in India?
The typical time for advertising, interviewing, screening, negotiating,
and hiring a new employee is about two weeks. Companies usually
allot one week for programmers to become familiar with the new
business, two more weeks for technical training, and one last week for
customer training.

Now imagine a 25% turnover rate and replacing 25 of these


programmers each year. Based on a yearly salary of $15,000 for the
human resource person and $25,000 for the programmer, it would
cost an additional $63,000 annually in acquisition and employee
training costs. After considering these figures, it quickly becomes
apparent why companies are investing in strategies to prevent
turnover.

TRUTHS ABOUT EMPLOYEE TURNOVER


It is difficult to accept when organizations say they have zero attrition
rates. Companies may have healthier turnover rates, however,
there is no such thing as zero attrition. There are other such facts
about turnover, about which most of us are not aware.
Some of such facts relating to employee turnover have been
highlighted below:

Turnover Always Happens: Companies who believe in zero


attrition rates only fool themselves. This happens because
employees keep on moving due to reasons like marriage or further
education. Nothing can top these employees from moving on. So,
rather than achieving zero attrition companies should focus on
identifying whom they want to keep so that they have healthy
attrition rate.
Some Turnover is Desirable: Zero attrition is not desirable
mainly because of two reasons. Firstly, if all employees continue
to stay in the same organization, most of them will be at the top of
their pay scale which will result in excessive manpower costs.
Secondly, new employees bring new ideas, approaches, abilities &
attitudes which can keep the organization from becoming
stagnant.

Turnover Includes Costs: Turnover always includes some costs.


Consider the costs of replacing the key employee who falls in to
the category of high performers. This includes the costs of
recruitment advertisement, referral bonuses, selection testing,
training costs, etc. Moreover, turnover results in loss of time and
efforts, low productivity, loss of morale, loss of knowledge and so
on.
High Salary Doesn’t Work: Most managers assume that a high
salary package is enough to keep employees loyal to their
organization. Employees may face other problems like low job
satisfaction, low engagement levels, no recognition, poor working
conditions, less support from superiors and so on. Salaries are not
always the solution to attrition. Managers should try to identify
the roots of the problem and then find a feasible solution.
The Manager Can Reduce Attrition: Managers should take
primary responsibility for retaining their employees. Much of the
employee’s perception of job satisfaction stems from the
relationship they share with their immediate supervisor.
Managers should try to support their subordinates and give
proper feedback on performance. HR managers should work in
collaboration to make the key employees last in their organization.

6. Reducing Turnover takes Commitment: Reducing turnover


takes an investment in coaching, developing, motivating, mentoring
& listening to people. There should be universal acceptance of the
goal of reducing turnover along with top management commitment
and dedication.

REASONS FOR EMPLOYEE TURNOVER


It is not easy to find out as to who contributes and who has the
control on the attrition of employees. Various studies/survey
conducted indicates that every one is contributing to the prevailing
attrition. Turnover does not happen for one or two reasons. The way
the industry is projected and speed at which the companies are
expanding has a major part in employee turnover.

For a moment if we look back, did we plan for the growth of this
industry and answer will be no. The readiness in all aspects will ease
the problems to some extent. In our country we start the industry and
then develop the infrastructure. All the major IT companies have
faced these realities. If you look within, the specific reasons for
attrition are varied in nature and it is interesting to know why the
people change jobs so quickly. Even today, the main reason for
changing jobs is for higher salary and better benefits. But in call
centers the reasons are many and it is also true that for funny reasons
people change jobs. At the same time the attrition cannot be
attributed to employees alone.

Organizational Matters:
The employees always assess the management values, work culture,
work practices and credibility of the organization. The Indian
companies do have difficulties in getting the businesses and retain it
for a long time. There are always ups and downs in the business.
When there is no focus and in the absence of business plans, non-
availability of the campaigns makes people to quickly move out of the
organization.

Working Environment:
Working environment is the most important cause of high turnover.
Employees expect very professional approach and international
working environment. They expect very friendly and learning
environment. It means bossism; rigid rules and stick approach will
not suit the call center. Employees look for freedom, good treatment
from the superiors, good encouragement, friendly approach from one
and all, and good motivation.

Job Matters:
No doubt the jobs today bring lots of pressure and stress is high. The
employees leave the job if there is too much pressure on performance
or any work related pressure. It is quite common that employees are
moved from one process to another. They take time to get adjusted
with the new campaigns and few employees find it difficult to get
adjusted and they leave immediately. Monotony sets in very quickly
and this is one of the main reasons for attrition. Youngsters look jobs
as being temporary and they quickly change the job once they get in
to their own field. The other option is to move to such other process
work where there is no pressure of sales and meeting service level
agreements (SLA).
The employees move out if there are strained relations with the
superiors or with the subordinates or any slightest discontent.
Salary and Other Benefits:
Moving from one job to another for higher salary, better positions
and better benefits are the most important reasons for attrition. The
salary and offered from Foreign companies have gone up very high
and it is highly impossible for Indian IT companies to meet the
expectation of the employees. The employees expect salary revision
once in 4-6 months and if not they move to other organizations.

Personal Reasons:
The personal reasons are many and only few are visible to us. The
foremost personal reasons are getting married or falling in love or
change of place. The next important personal reason is going for
higher education. Most of the BE, MCA and others appear for GATE
examination or other examinations and once they get cleared they
quickly move out.

Health is another aspect, which contributes for attrition. Employees


do get affected with health problems like sleep disturbances,
indigestion, headache, throat infection and gynecological dysfunction
for lady employees. Employees who have allergic problems and
unable to cope with the AC hall etc will tend to get various other
health problems and loose interest to work.

Poaching:
The demand for trained and competent manpower is very high.
Poaching has become very common. The big companies target
employees of small companies. The placement agencies have good
days for doing more business.

The employees with 4-6 months experience have very good


confidence and dare to walk out and get a better job in a week's time.
Most of the organizations have employee referral schemes and this
makes people to spread message and refer the know candidates from
the previous companies and earn too.

Employee’s Advocate:

One of the main reasons why employees leave companies is because


of problems with their managers. An HR professional can be termed
an employee’s advocate and a bridge between top management and
employees at all levels. There is a huge gap between HR professionals
and employees in terms of understanding challenges and delivering
requirements. HR has not really understood the problems associated
with employees’ careers and jobs. The company’s overall plans and
strategies also depend on HR professionals as they voice employees’
problems and requirements. The HR department should have
genuine interest in the employees’ welfare…it is responsible for
making sure that their expectations are met. By doing this it is easier
to meet the company’s business targets.

EFFECTS OF EMPLOYEE TURNOVER


There is no set level of employee turnover which effects on the
employing organisation become damaging. Mostly it is said that
employee turnover is not good for the organizations. But employers
should remember that turnover is not that bad either. What is
required is an optimum mix of turnover, not too high-not too low. An
optimum mix of employee turnover can help in many ways.

A little rate of employee turnover may result into:

1. Bringing in new ideas and skills from new hires.


2. Better employee-job matches.
3. More staffing flexibility.
4. Facilitate change and innovation.

High rate of turnover may lead to decrease in:

1. Productivity
2. Service delivery
3. Spread of organizational knowledge

4. Interdependence of workers which creates bottlenecks in the


smooth flow of activities which affects the overall co-ordination.
5. Additional direct and indirect cost increase the cost of
production and in turn there is a reduction in the profit.

REDUCING EMPLOYEE TURNOVER


With today's baby boomer generation beginning to retire from the
labor market, many IT companies are finding it increasingly difficult
to retain employees. Turnover is becoming a serious problem in
today's corporate environment. The employment culture is changing
as well. It is now relatively common to change jobs every few years,
rather than grow with one company throughout the employment life
as was once commonplace. In addition, employees are increasingly
demanding a balance between work and family life.

Therefore, there are Seven Major Areas of Intervention that


helps to Reduce Employee Turnover mentioned below:

1. Early Interventions

2. Skill Interventions

3. Leadership Interventions

4. Communication Interventions

5. Reward/recognition Interventions

6. Job Enrichment Interventions

7. Selection Interventions

EARLY INTERVENTIONS:
The fact that large numbers of employees turnover in the first six
months of employment suggests that this is a critical time for helping
people adjust to new roles. Managing employee’s expectations should
actually start before employment.

Thus the Orientation Programs should not be a one-day event; they


should span the first three months of employment. A good orientation
program helps prevent misunderstandings, and gradually introduces
the employee into the organization. By providing just-in-time
information and training, rather than a one-day "core dump" of
information, gives better results of training efforts.

Most importantly, establish a support system for the new employee. A


good practice is to set up a "buddy" system for new employees. A
"buddy" is a seasoned employee who volunteers to "look out for the
new employee", making introductions, providing advice, and helping
avoid early pitfalls.

SKILL INTERVENTIONS:

Keep employees motivated and committed by enthusiastically


offering both training and development opportunities. On the hand,
the personal development of employees helps in employee retention.
For Example, the top-rated companies spend considerable time in
training their people, they have low turnover rates, and they have
impressive numbers of applicants per job.

LEADERSHIP INTERVENTIONS:
Better Bosses mean lower turnover. Establishing performance
expectations, providing coaching and positive feedback, and
interacting in a fair and considerate manner are all things that good
leaders do to help new employees be successful and receive
enjoyment from their jobs. To impact turnover, make sure that
supervisory promotion and training programs have interpersonal
skills as part of their focus. Measure employee perceptions of
leadership behaviors and incorporate behavioral expectations into
leaders’ performance management expectations.

COMMUNICATION INTERVENTIONS:

There are certain ways of communication intervention that helps to


reduce turnover rates, such as:
1. Hold Open Forums: - Set up monthly or at least quarterly
forums in which employees can talk with decision-makers on
issues important to them.
2. Improve Credibility: - Do what you say you are going to do
or offer a good reason why you cannot.
3. Find Ways To Communicate: - Communication is the
solution to almost everything in this world. Same applies to
employee retention also, thus employers should determine
various ways of communication such as a quarterly employee
newsletter.
4. Eliminate Fear Of Reprisal: - Use suggestion boxes as an
anonymous way for employees to speak out.
5. Share Important Information: - Treat employees as
partners. Share important information so this might make
employees feel a sense of accomplishment or on problems that
might encourage them to go the extra mile.

REWARDS/RECOGNITION INTERVENTIONS:

Money can talk volumes, but the creative use of money is a key to
retention. Various kinds of contingent bonus strategies can be used to
help with retention, which are:-
1. Deferred bonuses are paid out incrementally with a
significant back-end payoff for a combination of performance
and retention. This type of bonus system can help guarantee
service for a finite number of years but also address long term
retention.
2. Performance bonuses can help an employee reach high
levels of income providing they can consistently demonstrate
superior levels of performance. This type of bonus can be very
effective if performance metrics are readily available and
additional costs are consistent with the value of superior
performance.
3. Salary Adjustments a third option besides the use of bonuses
a regularly salary adjustments for your star performers or an
individual with key skill sets so that they are not tempted to go
elsewhere for bigger paychecks.
JOB ENRICHMENT INTERVENTION:

Increasing the job satisfaction of high turnover jobs can reduce


turnover. For individuals who have a need for growth, the following
job design strategies are associated with increased job satisfaction:
1. Increase the variety of tasks performed
2. Provide greater ownership and decision-making on how the job
is performed and hold the job holder accountable for quality of
outputs
3. Add more significant responsibilities
4. Improve the accuracy and quality of feedback on performance

SELECTION INTERVENTION:

Improved selection may be the most powerful weapon against


turnover. Selection is a preventive technique for reducing turnover.
By improving the initial fit between an individual and a job, you can
have a huge impact on turnover.

Hiring managers have become more sophisticated in identifying the


candidate whose credentials best match the requirements of an open
position. However, the right education and work experiences are not
enough to ensure employee survival, therefore, to avoid costly
turnover, today hiring managers must look beyond the candidates’
ability to perform and make sure the candidate is also motivated to
perform in the work opportunity.
EMPLOYEE RETENTION STRATEGIES
Apart from above mentioned Intervention Techniques another means
to Reduce Employee Turnover, is applying Employee Retention
Strategies. Therefore, the basic practices which should be kept in
mind in the employee retention strategies are as following:
1. Hire the right people in the first place.

2. Empower the employees: Give the employees the authority to

get things done.

3. Make employees realize that they are the most valuable asset of

the organization.

4. Have faith in them, trust them and respect them.

5. Provide them information and knowledge.

6. Keep providing them feedback on their performance.

7. Recognize and appreciate their achievements.

8. Keep their morale high.

9. Create an environment where the employees want to work and

have fun.

These practices can be categorized in three levels of management i.e.


Low Level, Medium Level and High level which is shown with
the help of Flow Chart as under:-
HOW TO RESTRANIT EMPLOYEE
TURNOVER
Employee Turnover has become a major concern for organization
today with labor shortage and competitive pressure making retention
of key employees a strategic issue, thus, following are the ways to curb
employees in an organization as under:

Money Is Not Everything:


Although the importance of higher packages is slowly diminishing,
among fresher or laterals with less than three years of work
experience, money is still considered to be the highest priority.
Employees want not only work recognition, but also extra perks." A
number of professionals are looking at more challenging jobs. "In
several cases, faced with a choice between more money and a
challenging job, employees have opted for the latter as it allows them
to learn new technology and increase domain expertise." People
analyze the training programmes of prospective companies with those
of their current organization, which means that how an organization
grooms an employee is weighed to a greater extent. This is because
they know that developing next-level skills will keep them ahead in
the job market, and finally result in better compensation. They also
look for a job with higher levels of responsibility, better learning
opportunities.

Vision and Objectives:


The next level of communication, a crucial part of retention, starts
with acquainting employees with the company’s vision and objectives.
Organizations successful in retaining employees clearly pass on their
goals and achievements. Conducting regular meetings and updating
employees, especially new entrants, about the company’s status and
achievements is a must.” They should concentrate on leadership and
brand building as people prefer to be associated with a brand. The
youth should feel proud to be a part of the billion-dollar industry.

Mentoring and handholding new recruits from day one to four


months are important tasks; during this period, they should be
familiarized with the culture of the company. It is at this time that
new entrants experiment with different options. Hence they should
be exposed to the best values the company has.” If they are informed
about regular happenings in the company, employees will be
confident about the future and not try to look for better options.

Treat Employees like Customers:


Even while companies strive to understand which organizational, job,
and reward factors will contribute to holding back employees,
industry experts have found several loopholes at the top management
and HR management level. Companies should have a similar
approach to employees and customers.
If a company strives to retain an employee in the same way it tries to
retain a customer, him leaving the organization could be out of
question.
Since software professionals have different priorities at different
points of time, organizations need to structure their offer-mix while
recruiting new hires, as well as promoting potential ones.
Communication is the foundation for the entire process of managing
attrition. This communication begins right from recruitment. In cases
of peer pressure, an employee aims to join a well-known company.
This could be achieved by brand building, which attracts the right
talent and helps in retention as well.
Understanding an employee’s needs at various levels is a
recommended HR practice.

Consider Feedback:
It is important to take feedback from employees through different
means and work with the HR department to iron out differences. As
industry experts point out, feedback can be got in two ways—during
the employee’s tenure, and through exit interviews. Inputs can be
secured from existing employees through various employee
relationship management tools. The Wipro Listens and Responds
initiative at Wipro aims to capture the concerns and grievances of its
employees. “The feedback we get through this tool will be analyzed,
and action will be taken on it. Our employees are very excited that
their feedback is being taken seriously,” says Sahoo.
Exit interviews help management learn the reasons why employees
leave the company; based on their revelations, the organization can
address the problems of existing employees, thereby curb attrition.
Spend Time Developing and Benchmarking Incentives:
Whenever the demand for a professional arises in a particular field,
the perks associated with the job start to pile up. Standard perks for
an India-based "fresher" (a new entrant in the IT services industry
with little work experience) typically include free transportation,
educational assistance, healthcare benefits, performance-based
bonuses, onsite cafeteria, stock options, and interest-free loans to
absorb the cost of relocation or maybe to finance the purchase of a
two-wheeler. According to Wipro's web site, its employees even have
access to an agency that will handle such "domestic chores" as paying
bills, thereby giving IT workers more free time.

IT service providers have to offer innovative compensation and


benefits—or risk losing valued employees to competitors. Nonstop
evaluation and benchmarking are "need to do" activities for IT
managers.

Change Locations:
The high prices and resource crunch in top-tier Indian cities such as
Bangalore and Mumbai have led many companies to execute
alternative location strategies. Many vendors are sending work to
tier-two cities (Hyderabad or Chennai) or even tier-three cities
(Noida or Chandigarh), where labor and real estate costs as well as
attrition may be cut in half. Such benefits come at a price: The
infrastructure quality lags that of more advanced cities, and the
search to find qualified people may take longer.

Rotate Employees:
Employees who don't feel challenged by their work often leave. In
response, companies such as TCS have programs that rotate
employees into different disciplines about every two years and expose
them to new locations, projects, and technologies.

Offshore employees are asking for a clear career path with increased
responsibility and frequent recognition of achievement. Established
U.S. and European multinational companies have long had learning
programs that set expectations for performance goals such as learning
a particular tool or proprietary software. Companies practicing off
shoring need to provide new challenges and opportunities for skills
development through training or job rotation. It may become the only
reason your best employees stay with you.

Just Ask: Are Your Employees Satisfied?


Retention is inextricably linked to employee satisfaction, so it pays to
periodically survey employees —hopefully before their exit interviews
—about job satisfaction issues, and act on the data gathered. The aim
is to determine why some employees depart and some remain with
the company, and to define the traits of productive, successful
employees. Many companies examine the reasons employees leave,
which don't reveal as much as the reasons they stay.

An important aspect of implementing a retention program


understands that it should not be one-size-fits-all. If incentives are
meant to keep employees happy, then they truly have to be designed
with the employee in mind. Too often, employers and employees
disagree on what constitutes a good incentive. For example, a
company might reward a father with three young children a monetary
bonus as thanks for working overtime for five months straight. To the
father, however, days off might have been more attractive, since they
would have allowed him to spend time with his family.

Knowing your employees and personalizing rewards makes a


difference. The global workforce has different, individualized needs,
and organizations should tailor incentives for their employees if they
want to retain them. If your company doesn't bother, don't be
surprised if workers head for the door as soon as year-end bonuses
are handed out or stock options vest.

Spend More Time Recruiting:


With huge projects ramping up within exceedingly short windows, it
can be hard to convince management to allot more time to the
recruiting process. However, it's difficult to retain good employees if
the company doesn't have a process to hire the right people in the
first place. Simple measures, such as incorporating skills tests that
relate directly to the job in question, can help companies to determine
whether the applicant is indeed an expert programmer or merely an
intermediate programmer. Having employees interview candidates
also may increase the chances of success, as these employees can
better identify potential personality clashes that HR personnel may
not spot.

EMPLOYEE TURNOVER COST CALCULATION


The impact of employee turnover on company performance is often
understated by organizations. This describes how the cost of turnover is
can be calculated using some basic organizational parameters. The purpose
of this document is to provide talent cost of turnover calculator with insight
into how costs are calculated and the reasons why certain costs were
include or excluded form the calculator. The calculator should only be used
as a guide in understanding the impact of turnover on a company. If the
desire is to understand the true cost of turnover then it is suggested that a
greater degree of analytical work is undertaken.

The following table can be helpful to calculate the cost of employee


turnover per week or per month:-

Separation Cost/Employee Detachment Cost:

Cost of Exit Interview ……………………………………………………………

+ Cost of Termination Time ………………………………………………………..

+ Cost spent in Administrative Procedures …………………………………………

+ Increased Unemployment Tax ……………………………………………………

Cost of Vacancy:

Cost of Additional Overtime ……………………………………………………...

+ Cost of Additional Temporary Help ……………………………………………...

- Wages and Benefits saved due to Vacancy ………………………………………

Cost of Replacement:
Pre Employment Administrative Expenses

+ Cost of Attracting Applicants

+ Cost of Entrance Interviews

+ Testing Costs

+ Staff Costs

+ Travel and Moving Expenses

+ Post Employment Information Gathering & Dissemination Costs

+ Cost of Post Employment Medical Exams

Training Costs:

Cost of Informational Literature

+ Formal Training Costs

+ Informal Training Costs

Employee Performance Differential:

Differential in Performance Costs/Benefits

TOTAL TURNOVER COSTS PER EMPLOYEE

MEASUREMENT OF EMPLOYEE TURNOVER:-


Three different methods are used for measuring the Employee turnover
rate:

1) SEPARATION METHOD:

It is computed as: -

Number of separation in a period

------------------------------------------ X 100

Avg. no. of worker

2) REPLACEMENT METHOD:

It is calculated as:-

Number of replacement in a period

------------------------------------------- X 100

Avg. no. of worker

3) FLUX METHOD:

It is calculated as:-

Number of separation + Number of replacement

----------------------------------------------X 100

Avg. no. of worker

BENEFITS OF TURNOVER
Turnover is not bad always if it happens in a controlled manner.
Some turnover is always desirable and necessary for organizational
growth and development. The only concern is how organizations
differentiate “good turnover” from “bad turnover”. The term “healthy
turnover” or “good turnover” signifies the importance of less
productive employees voluntarily leaving the organization. This
means if the ones who have left fall in the category of low performers,
the turnover in considered being healthy.

Turnover rates are considered to be beneficial in some


ways:

1. If all employees stay in the same organization for a very long


time, most of them will be at the top of their pay scale which
will result in excessive manpower costs.

2. When certain employees leave, whose continuation of service


would have negatively impacted productivity and profitability of
the company, the company is benefited.

3. New employees bring new ideas, approaches, abilities &


attitudes which can keep the organization from becoming
stagnant.

4. There are also some people in the organization who have a


negative and demoralizing influence on the work culture and
team spirit. This, in the long-term, is detrimental to
organizational health.

5. Desirable turnover also includes termination of employees with


whom the organization does not want to continue a
relationship. It benefits the organization in the following ways:
o It removes bottleneck in the progress of the company

o It creates space for the entry of new talents

o It assists in evolving high performance teams

6. There are people who are not able to balance their performance
as per expectations, lack potential for future or need
disciplinary action. Furthermore, as the rewards are limited,
business pressures do not allow the management to over-
reward the performers, but when undesirable employees leave
the company, the good employees can be given the share that
they deserve.

However, some companies believe turnover in any form is bad for an


organization for it means that a wrong choice was made at the
beginning while recruiting. Even good turnover indicates loss as
recruitment is a time consuming and costly affair. The only positive
point is that the realization has initiated action that will lead to
cutting loss.

SUGGESTIONS
Employee turnover for instance may include cost that results from
employees’ slower work pace and increased absenteeism. A company
puts in maximum investment towards developing its manpower in
order to get best output which results in high profit and productivity
for the company.

Following suggestions are given to decrease the percentage of


Employee Turnover in IT Industry as under:

1. Clearly define targets and goals. Setting a time frame and


numbers creates impetus for action, thus, MBO technique
can be applied so that employee set their own goals.
2. The grievance redressed procedure can be improved.
3. Better pay package for deserving employee can be considered for
their retention.
4. Implement careful and strategic planning for targeted individuals’
career development. Being identified is not enough. Consider
potential benefits of encouraging informal mentoring.
5. Ensure there is strong leadership and commitment from
senior management. Initial and on-going personal
involvement of the Chief Executive is crucial to success.
6. Integrate succession planning into business and diversity
objectives. A clear link between business goals and the
desired results of the succession planning will assist in
gaining commitment from the organization and staff. To be
successful it must be portrayed as a core issue.
7. The 3 R’s that is Recruitments, Retentions, and Retirement
benefits should be properly imposed.
CONCLUSION
The ever-increasing tangible and intangible costs of replacing an
existing employee with known skill sets and knowledge of the
organizational culture would leave any HR executive with sleepless
nights. But the fact remains that however satisfied they may seem
employees leave. So employee turnover is sometimes referred to as a
symptom of many hidden problems. The main objective of this report
is to study vital causes of employee turnover and their effects on the
IT industry and to discover those hidden roots of the trouble to
reduce such employee turnover.

Therefore, the following points have been concluded:-

1. Inculcating values like trust and accountability among the


employees is the best way to hold back talents in an
organization
2. Employees leave not always for higher salaries. In fact, there is
a limit to the salaries an employer can afford to pay even its best
performing employees. Rather, the major issues lie with the
unarticulated needs of the employees.
3. Employees often expect a sense of worth from peers, seniors
and other departments. They want to trust the senior
management and also walk the talk when it comes to living the
vision and mission, as well as the other promises
communicated.
4. They expect the management to get a buy-in from them on
critical decisions that effect the organization. With all these they
also, quite naturally yarn for a well-planned career growth path.
5. To ensure that their skills and roles are aligned to that of the
organization, employees need to be trained through role
transitions. This allows employees change their career path as
per their skills and future goals.
6. The human resource department has a critical role to play in
this organization-individual competency alignment. The
responsibility of predicting process and individual performance
levels based on industry trends is entirely on the HR team. They
need to work on the existing data on performances and generate
actions plans for individual level performance management.
7. Finally, employers need to take care of all the factors that affect
an employee, while formulating effective employee retention
programmed. The factors can be encapsulated as Fit, Trust,
Confidence & Trust, and Listening.