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IBBusinessDPBusiness ManagementHLRevision Notes2. Human Resource Management2.4 Motivation & DemotivationLabour Turnover

Labour Turnover (DP IB Business Management)

Revision Note

Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

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 space Turnover space equals fraction numerator Number space of space Staff space Leaving over denominator Total space Number space of space Staff end fraction space space cross times space 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

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 space Turnover space equals fraction numerator Number space of space Staff space Leaving over denominator Total space Number space of space Staff end fraction space space cross times space 100 Labour space Turnover space equals 54 over 432 space space equals space 0.125 space cross times space 100 space equals space 12.5 percent sign space (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 space Retention space equals space fraction numerator Number space of space Staff space Remaining over denominator Total space Number space of space Staff end fraction space space cross times space 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 space Retention space equals space fraction numerator Number space of space Staff space Remaining over denominator Total space Number space of space Staff end fraction space space cross times space 100 Labour space Retention space equals space fraction numerator 3 comma 975 over denominator 4 comma 240 end fraction space space space equals space 0.9375 space cross times space 100 space equals space 93.75 percent sign           (1 mark)

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    Author
    Reviewer
    Lisa Eades

    Author: Lisa Eades

    Expertise: Business Content Creator

    Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

    Steve Vorster

    Author: Steve Vorster

    Expertise: Economics & Business Subject Lead

    Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.