Employee Turnover & Its Impacts on Organisations

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Table of Contents Page 1. Definition • • How to calculate Employee Turnover Rate Within the 1st Year Table 1: Average Annual Turnover Rate by Industry and Occupational Groups • • The Rising Turnover Trend The Salmon Fallacy 4 5 3 3 4

2. Effects and Impacts of High Employee Turnover to Organisations 3. Benefits of Employee Retention • Binding: Choices in Retaining Talent a. Offer financial inducements b. Offer intrinsic inducements c. Offer extrinsic inducements d. Boosting: Promotion puts people in the right jobs 4. High Employee Turnover 5. Steps and Actions to Reduce High Employee Turnover 6. Conclusion 7. Reference

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1. Definition Employee turnover is the rotation of workers around the labour market; between firms, jobs and occupations; and between the states of employment and unemployment (Abassi et al., 2000). Price (1977) defined turnover as the ratio of the number of organisational members who have left during the period being considered divided by the average number of people in that organization during the period. Managers refer turnover as the entire process associated with filling a vacancy – either voluntarily or involuntarily, each time a position is vacated; a new employee must be hired and trained. This replacement cycle is known as turnover (Woods, 1995), and often utilized in efforts to measure relationships of employees in an organisation as they leave, regardless of reasons. How to calculate employee turnover rates within the first year:

Source: How to calculate employee turnover cited in Payscale for Employers, 2010 [Accessed 10 February 2011] In 1995, the average monthly resignation rates were 3.4%, 2.9%, and 2.7% in Singapore, South Korea, and Taiwan, respectively (Barnard & Rodgers, 1998). Press reports in 1996 highlighting cost and disruptions associated with jobhopping continued unabated (Straits Times, 1996). Its extent was manifested by the fact that our parliament brought up the same issue. There was a deep concern at the national level that job-hopping was adversely affecting Singapore’s competitiveness (Straits Times, 1998).



The table below shows the average annual turnover rate for selected industries and occupations in Singapore from 1995 to 1997. period. Table 1: Average Annual Turnover Rate by Industry and Occupational Groups 1995 (%) Manufacturing Construction Industry Retail Hotels & Restaurants Transport & Communications Banking & Finance Professional/Managerial/Technical Occupation Clerical, Sales & Service Production & Transport 36.0 27.6 80.4 67.2 22.8 22.8 21.6 48.0 37.2 1996 (%) 33.6 25.2 75.6 54.0 21.6 25.2 21.6 44.4 33.6 1997 (%) 30.0 27.6 74.4 57.6 20.4 22.8 22.8 44.4 32.4

Turnover rates were

alarmingly high though there had been a marginal decline over the three-year

Source: Quarterly Reports from Ministry of Manpower, Singapore in 1998 The Rising Turnover Trend The Bureau of Labor Statistics reported that for the first time in 15 months the number of voluntary resignations has surpassed the number of people laid off or dismissed. The chart below, from the Wall Street Journal’s coverage of the story, demonstrates the significance of this trend in the past year. (Source: http://jcsi.net/statistics/the-rising-turnovertrend.html, 8 February 2011)



Talented people who were eager to grow and looking to advance their careers but have withheld advancement plans, drive the natural turnover. The turnover did not occur in the past few years due to an economic recession. The natural turnover caused a backlog of people waiting for economic conditions to improve and recover so they could make a move in their careers. The prospect of getting higher pay elsewhere is one of the most obvious...
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