How to Calculate Labor Turnover

To calculate Labor turnover is important for organisation because it completely affects labor costs. This means, % of labor changes after a certain time or be replaced by company. Both things increase labor costs. Repeatedly leaving the job by the labor, accidents, deaths of labors, labor retrenchment are the main examples of labor turnover. So, it decreases the level of production and also production is delayed. It also increases the cost of production.

So, for controlling it, we calculate the percentage of labor turnover by applying following steps

First :  Calculate Average No. of Employees during a period

First of all you have to calculate average number of employees during a period. It can be calculated by totaling of no. of employees in the beginning of year and no. of employees in the end of year and then divided by 2. Employees in the beginning of year can be found by checking of labor registers and employees in the end can be found through physical verification.

Second : Determination of Changes in Labor

After taking first step, following second step should be taken:

a) To find the employees who left the organization.

b) To find the employees who are required by organization.

c) To find the employees who are the newly appointed in the year.

Third : Apply the suitable formula of Labor turnover

Following are the main methods for calculating the labor turnover. You can use any best formula by using any one method in your organization.

Ist method

Labor turnover with separation

= No. of employees left during the period / Average no. of employees during the period X 100

2nd Method Labor turnover with flux

= number of required employee + no. of employee left the job / average number of employee X 100

3rd Method labor turnover with Optimum

= number of required employees + number of employees left the job/2 / average number of employees X 100

4th Method Labor turnover with replacement

= number of employees appointed newly / average number of employees X 100

For Example

From the following information, calculate the labor turnover rate

a) With separation method
b) With flux method
c) With optimum method
d) With replacement method

Number of workers at the beginning of year = 3800

Number of workers at the end of year = 4200

During the year 40 workers left while 160 workers are discharged. 600 worker were required during the year, of these 150 workers are recruited because of leavers and rest are engaged in accordance with an expansion scheme.

Average number of workers during the year = 3800 + 4200/2 = 4000

a) With separation method

LTR = 200/4000 X 100 = 5%

b) With flux method

LTR = 150 +200 / 4000 = 8.7%

c) With optimum method

LTR = 150 +200 /2 / 4000 X 100 = 4.3%

d) With replacement method

LTR = 150/4000 X 100 = 3.75%



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Accounting Education: How to Calculate Labor Turnover
How to Calculate Labor Turnover
Accounting Education
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