Q&A - Explain what labour turnover is and why it happens

Labour turnover (or “staff turnover” as it is sometimes called) is all about employee retention - i.e. the ability of a business to convince its employees to remain with the business.

Labour turnover is defined as the proportion of a firm’s workforce that leaves during the course of a year. The formula for calculating labour turnover is, therefore:

An example of using the formula is shown below:

The CIPD estimate that the average level of labour turnover in the UK is 13.5%

It is important to remember that all businesses lose staff – for a variety of reasons:

- Retirement / Maternity / Death / Long-term Illness
- Unsuitability for the job
- Changes in strategy (e.g. closure of locations)
- Changes in capacity - e.g. a decision to reduce output by closing a shift
- Seasonal changes in demand (one reason why labour turnover is traditionally high in industries that employ many temporary or seasonal staff)

For a business, we are more concerned with the loss of staff for reasons other than above. You might call this voluntary staff turnover – employees who leave of their own accord.

It is important to remember that labour turnover levels vary between industries. Successive surveys of labour turnover show that the highest levels are typically found in retailing, hotels, catering and leisure, call centres and among other lower paid private sector services groups.

Labour turnover levels also vary from region to region. The highest rates are found where unemployment is lowest and where it is unproblematic for people to secure desirable alternative employment.