🔄 Labour Turnover
Big Idea: Labour turnover is the rate at which employees leave a business over a given period. It is expressed as a percentage: (Number of employees leaving / Average number of employees) x 100.
The formula
Labour turnover rate = (Number of employees leaving during period / Average number of employees during period) x 100
What causes employees to leave?
- Push factors (problems that drive people away): low pay, poor working conditions, lack of career progression, bad management, boring work, conflict with colleagues
- Pull factors (attractions elsewhere): better pay at a competitor, more interesting role, relocation, career change, retirement
In the BTO case study, labour turnover was LOW at the original restaurant. Employees received an annual bonus that increased with each year of service. This created loyalty and experience -- but also meant higher labour costs over time. When BTO expanded to three restaurants, maintaining this culture with 32 new employees was a challenge.
Positive impacts of LOW labour turnover
- Lower recruitment and training costs -- fewer new employees to hire and train
- Experienced workforce -- long-serving employees know the business well and deliver better quality
- Stronger customer relationships -- regular customers build rapport with familiar staff
- Higher productivity -- experienced workers are more efficient
Negative impacts of LOW labour turnover
- Lack of new ideas -- without new people joining, the business may become stale and resistant to change
- Higher labour costs -- long-serving employees often earn more (seniority-based pay, loyalty bonuses)
- Complacency -- some employees may become comfortable and stop pushing themselves
Negative impacts of HIGH labour turnover
- Increased recruitment and training costs -- constantly hiring and training replacements is expensive
- Loss of experienced workers -- new employees take time to reach full productivity
- Disruption -- frequent staff changes disrupt teams, customer relationships and workflows
- Lower morale -- remaining employees may feel overburdened or anxious
Exam questions often ask for BOTH positive AND negative impacts of labour turnover. The BTO question is a perfect example: low turnover at BTO meant experienced, loyal staff (positive) but also higher labour costs and lack of new ideas (negative). Always give both sides!
Labour turnover questions appear regularly. Always: (1) state the impact, (2) explain WHY, (3) apply to the specific business. 🎯