A project Report

On
“Causes and Effects of Labour Turnover”

Submitted By
Abhilipsha sahu
+2 2nd Year Commerce
Roll No. IC18-004
Registration No - LB03C18004

In partial fulfillment of the requirement of Project work of

Annual Higher Secondary Examination 2019-20.

Government Higher Secondary School,

Phulbani

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 Acknowledgement

I would like to convey my heartiest gratitude to Mr. Rajesh Kumar Dhal, Jr

Lecturer in Commerce, Government Junior College, Phulbani, for his immense help and

guidance in the process of completion of my project work. It is only because of his

unconditional support and sincere efforts that my project work could be completed

successfully within time. This report is submitted as a part of project work included in the

curriculum of CHSE, Odisha for Annual Higher Secondary Examination to be held in

the year 2019-20.

Name of the student: Chandan Guru

Roll No:IC18-015

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 CERTIFICATE

This is to certify that Mr. Chandan Guru of +2 2 nd Year Commerce, Roll No. IC18-015 of

Government Junior College, Phulbani, has completed this project under my supervision.

She has taken keen interest and shown utmost sincerity in completion of this project. She

has successfully completed this Project Work titled “Causes and Effects of Labour

Turnover”up to my expectation and level of satisfaction.

Mr. Rajesh Kumar Dhal

Jr. Lecturer in Commerce

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 Abstract

The proportion of numbers of workers leaving an organization during a given period & the

average number of workers working in that organization during the same period is known

as labour turnover. Higher the labour turnover, workers will be more unstable due to some

unavoidable reasons & such a situation is not favorable for any organization. High labour

turnover indicates high cost. The workers who are efficient find their places elsewhere. So,

if the efficient workers become dissatisfied with the organization, & leave the job, new set

of workers will replace them, but they cannot be expected to give the same output as given

by the outgoing efficient workers, from the beginning of the employment. Thus the output

will fall & will result in higher cost. On the other hand, if labour turnover is low, it cannot

be said that cost of production shall also be low. If average workers in the organization do

not have the standard efficiency, they will not be able to find jobs elsewhere. As a result

they will not move &labour turnover ratio will become low. But these workers cannot give

standard output as they themselves are below standard. More scarps are created by them

resulting in higher cost. Output is normally effected by frequent changes in staff & as a

result cost increased. The main objective of preparing this project report is to evaluate the

causes and effects of labour turnover.

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 Index

Sl. Contents Page

1 Introduction 06

2 Need or Objectives of the Study 06

3 Data Collection Sources 06

4 Case Study 07

5 Findings and Conclusion 12

6 References and Bibliographies 13

Introduction

The proportion of numbers of workers leaving an organization during a given period & the

average number of workers working in that organization during the same period is known
5
as labour turnover. Higher the labour turnover, workers will be more unstable due to some

unavoidable reasons & such a situation is not favorable for any organization.High labour

turnover indicates high cost. The workers who are efficient find their places elsewhere. So,

if the efficient workers become dissatisfied with the organization, & leave the job, new set

of workers will replace them, but they cannot be expected to give the same output as given

by the outgoing efficient workers, from the beginning of the employment. Thus the output

will fall & will result in higher cost. On the other hand, if labour turnover is low, it cannot

be said that cost of production shall also be low. If average workers in the organization do

not have the standard efficiency, they will not be able to find jobs elsewhere. As a result

they will not move &labour turnover ratio will become low. But these workers cannot give

standard output as they themselves are below standard. More scarps are created by them

resulting in higher cost. Output is normally effected by frequent changes in staff & as a

result cost increased.

Need or Objectives of the Study

 To evaluate the causes and effects of labour turnover

Data Collection Sources

The datas are basically collected from secondary sources. The researcher collects all the

information required for the purpose of preparing the project workfrom text and reference

books.

Case Study

Labour Turnover

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Ratio between numbers of workers leaving an organization during a given period & the

average number of workers working in that organization during the same period is known

as labour turnover. Higher the labour turnover, workers will be more unstable due to any

reasons & such a situation is not favorable for any organization. Different ways of

measuring Labour turnover ratio are mentioned below:

1st Method:

Labour Turnover ratio = Number of workers left during a period * 100

Average number of workers on roll during that period

Average number of workers = (Number at the beginning + Number at the end)/2

In an organization where there are surplus workers, the number of workers leaving will

likely to be high. In such cases, the above mentioned formula will not give true picture, as

workers may be very willing to continue in the organization but because they are surplus,

they had to go. This method is known as separation method as 'workers left' means 'workers

separated from the organization'.

2nd Method:

Labour Turnover ratio = Number of workers replaced during a period * 100

Average number of workers on roll during that period

The question of replacement does not arise when surplus workers are retrenched. The new

appointments replaced the workers whose services are required by the organizations, if they

leave. So, if separations that need replacement could be properly replaced, then labour

turnover ratio measured by this method will reflect the true state of affairs. Problem arises

regarding the replacement, when skilled labours leave the organization because skilled

labours are not available in sufficient numbers. Thus this method is known as Replacement

method, & can measure reliably, if the required replacement can be properly done.

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3rd Method:

Labour Turnover = (Number of workers left + Number of workers replaced during a period)x

100

Average number of workers on roll during that period

This method is known as flux method & is a combination of 1st & 2nd method.

4th Method:

Labour Turnover ratio = Number of workers required to be replaced during a period * 100

Average number of workers on roll during that period

This method substitutes "number of workers replaced" by "number of workers required to

be replaced", & so this is an improvement of the 2nd method. Where non- availability of

the desired type of workers does not affect replacement, labour turnover ratio can be

accurately measured by this method.

Causes of Labour Turnover: The main causes of labour turnover come under 2 heads:

1. Avoidable Causes:

a. Lack of job satisfaction

b. lack of scope for training & promotion

c. Bad working conditions

d. long hours of work

e. Lack of facilities for recreation, children's education etc.

f. inadequacy of welfare measures

g. inhumane attitude of management

h. Lack of understanding amongst the workers etc.

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 2. Unavoidable Causes:

a. Unhealthy atmosphere of the locality

b. Retirement & death

c. Leaving for a better chance

d. In case of seasonal industries, retrenchment during off-season

e. Social unrest

f. Marriage of female workers

g. Disablement due to accident inside or outside or disease

h. Due to political reasons or on the ground of health, change of place.

Effect of Labour Turnover:

High labour turnover indicates high cost. The workers who are efficient find their places

elsewhere. So, if the efficient workers become dissatisfied with the organization, & leave

the job, new set of workers will replace them, but they cannot be expected to give the same

output as given by the outgoing efficient workers, from the beginning of the employment.

Thus the output will fall & will result in higher cost. On the other hand, if labour turnover is

low, it cannot be said that cost of production shall also be low. If average workers in the

organization do not have the standard efficiency, they will not be able to find jobs

elsewhere. As a result they will not move &labour turnover ratio will become low. But

these workers cannot give standard output as they themselves are below standard. More

scarps are created by them resulting in higher cost. Output is normally effected by frequent

changes in staff & as a result cost increased.

Cost of Labour Turnover:

Cost of labour turnover may be classified into:

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 1. Preventive Costs:

2. These represent those costs which if incurred; then the leaving of the workers can be

prevented. For example:

a. Cost of providing better medical, housing, educational facilities, better

recreation etc.

b. Cost of providing retirement benefits, incentives, accident compensation etc.

c. Cost of providing better working conditions & better safety measures

d. Cost of providing for promotion & training etc.

e. Cost of maintaining better industrial relations & peace.

3. Replacement Costs:

4. These are those costs which have to be incurred in connection with the replacement

of workers who left. For example:

a. Cost of advertisement, selection & recruitment

b. Cost of training new workers

c. Loss of working hours & materials in course of training

d. Cost of scraps, defectives etc. created by the new workers

e. Cost of repairs etc. of machinery in course of training

f. If workers on training meet accident, compensation payable to them.

Reduction of Labour Turnover:

As already pointed out, normal labour turnover is advantageous because it allows injection

of fresh blood into the firm. But excessive labour turnover is not desirable because it shows

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that labour force is not contended. Therefore, every effort should be made to remove the

avoidable causes which give rise to excessive labour turnover.

Following steps may be taken to reduce the labour turnover:

I. A suitable personnel policy should be framed for employing the right man for the right

job and giving a fair and equal treatment to all workers.

II. Good working conditions which may be conducive to health and efficiency should be

provided.

III. Fair rates of pay and allowances and other monetary benefits should be introduced.

IV. Maximum non-monetary benefits (i.e., fringe benefits) should be introduced.

V. Distinction should be made between efficient and inefficient workers by introducing

incentive plans whereby efficient workers may be rewarded more as compared to

inefficient workers.

VI. An employee suggestion box scheme should be introduced whereby workers who

suggest improvements in the method of production should be suitably rewarded.

VII. Men-management relationships should be improved by encouraging labour

participation in management.

In addition to the above steps, the personnel department should prepare periodical reports

on the labour turnover listing out the various reasons due to which workers have left the

organisation. The report should be sent to the management with the necessary

recommendations so that corrective measures may be taken to reduce labour turnover.

Conclusions

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Labour Turnover is always a problem for the business concern. It can be minimized by

taking various remedial measures. The proportion of numbers of workers leaving an

organization during a given period & the average number of workers working in that

organization during the same period is known as labour turnover. Higher the labour

turnover, workers will be more unstable due to some unavoidable reasons & such a

situation is not favorable for any organization.High labour turnover indicates high cost. The

workers who are efficient find their places elsewhere. So, if the efficient workers become

dissatisfied with the organization, & leave the job, new set of workers will replace them,

but they cannot be expected to give the same output as given by the outgoing efficient

workers, from the beginning of the employment. Thus the output will fall & will result in

higher cost. On the other hand, if labour turnover is low, it cannot be said that cost of

production shall also be low. If average workers in the organization do not have the

standard efficiency, they will not be able to find jobs elsewhere. As a result they will not

move &labour turnover ratio will become low. But these workers cannot give standard

output as they themselves are below standard. More scarps are created by them resulting in

higher cost. Output is normally effected by frequent changes in staff & as a result cost

increased.

References and Bibliographies

1) Jain &Narang, 2017, +2 Cost Accounting, Kalyani Publishers

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2) Arrora M N, 2012, Cost Accounting, Himalaya Publishing House

3) www.google.co.in

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