Types Of Costs Associated With Labour Turnover
There are 2 types of costs associated with Labour Turnover. They are:-
1.Preventive Cost.
2.Replacement Cost.
What is Preventive Cost?
Preventive Cost includes those expenses which are incurred to keep the work satisfied and prevent them from leaving the organisation.
In other words, the cost which is incurred to prevent the workers from leaving is known as Preventive Cost. Such type of expenses cost include;
i.cost of providing medical facilities for the employees and their family members.
ii.Cost of implementing different employee welfare schemes like subsidised meals at canteen, cooperative stores, educational facilities for the children of the employees, providing transport facilities, subsidized housing schemes etc.
iii.Introducing pension schemes for the employees and giving them all types of retirement benefits.
iv.Extra bonus and other prerequisites to discourage the employees to leave the organisation and join somewhere else.
What is Replacement Cost?
It includes all such expenses and losses which occur due to labour turnover. In other words,the cost which are incurred to prevent the workers to live organisation is known as Replacement Cost.
It includes:
i.Cost of recruitment and selection of new workers.
ii.Cost of providing training to new workers.
iii.Loss of output due to time gap between old workers leaving the organisation and recruitment of new workers.
iv.Loss of production due to inefficiency of new workers.
v. Cost of accident due to mishandling of machines and equipment by new workers.
vi.Cost of extra scrap and defective work etc.
Measures/ Methods of Labour Turnover
Labour Turnover can be measured by 3 methods. They are:-
1.Separation Method
2.Replacement Method
3.Flux Method
What is Separation Method?
Separation Method takes into account only those workers who have left the organisation during a particular period.Under this method labour turnover rate is expressed as the ratio of number of separations during a period to average number of workers during the same period then the result is multiplied by 100.
Formula of Separation Method
What is Replacement Method?
The Replacement Method takes into account only those new workers who have been replaced in the place of workers leaving the organisation.Under this method labour turnover is calculated by dividing the number of workers to replace the average number of workers, then the result is multiplied by 100.
Formula of Replacement Method
If new workers are appointed for any expansion programme or for any other purpose,they are not considered for calculation of labour turnover.
What is Flux Method?
Flux Method shows total change in the composition of the labour force due to Separation and replacement of workers.Under this method labour turnover is calculated by dividing the total of separation and replacement workers with the average working force the result is multiplied by 100.
Formula of Flux Method
New workers joining the organisation due to opening of a new department or any expansion programme will not be taken into account for the calculation of labour turnover.