Labour Turnover and Labour Stability

Introduction

Labour turnover is a topic, or concept, that's widely discussed in business circles. Labour turnover concerns that rate at which people leave and join an organisation; and is basically concerned with the rate of replacement of employees. Labour stability, on the other hand, is a little known topic that deserves a bit more consideration than it gets. Labour stability is concerned with an organisation's ability to retain its employees.

This page discusses both labour turnover and labour stability.

Labour Turnover

We can define labour turnover by means of formulae: here are three of them.

Let's work through these formulae to see how they work and what they tell us:

	Jan	Feb	35547.02
Total employees at start	400	420	35566.22
Total employees at end	420	415	29982.28
Total leavers	30	28	43162.56
Total leavers replaced	20	28

Solution

	Jan	Feb
Total employees at start	400	420
+ New starters	50	23
	450	443
- Total employees at end	420	415
Total Leavers	30	28
Total leavers replaced	20	28
Turnover ratios
1	4.88%	6.71%
2	7.32%	6.71%
3	19.51%	12.22%

Check the calculations to your own satisfaction!

Since a lot of people know and understand the labour turnover ratio well enough, this paper concentrates on the labour stability measure.

Fiona wrote to me just the other day with a particular question relating to labour turnover so I put together a new page to answer that query: with a bit of an overlap with this page. See the menu on the left for the link.

Labour Stability

I came across labour stability in a paper by the Independent Labour Organisation (ILO) about 15 years ago now; and I haven't seen it anywhere else … apart from my own text book … and here!

The labour stability formula is

where

Ln is the total length of service in months of the employees concerned measured over the past n months.
n is the number of months over which stability is being measured
N is the total number of employees

The formula expresses stability as a percentage of the maximum possible stability.

The significance between labour stability and labour turnover is shown best of all when a high labour turnover rate is due mostly to a small proportion of jobs in the units being filled several times in the time period considered.
(Source: ILO 1984: 7)

Comparison of the Two Methods

For the 6 month period NW plc had an establishment of 75 people. Of the 75 people, there was a total of 15 leavers, all of whom were replaced. More specifically, though, 72 of the 75 people were employed throughout the whole 6 month period, therefore, the 15 leavers represented significant changes in only one or two jobs or positions. The average length of service of the people who had changed jobs during the 6 month period is 2 weeks.

Calculate the labour turnover and labour stability rates for NW plc.

labour turnover:

labour stability:

The turnover rate suggests that NW plc is 80% stable, 20% unstable whereas the stability rate suggests that NW plc is 97.67% stable, only 2.33% unstable.

The Benefit of the Stability Ratio

The benefit of the stability ratio is that it picks out that although a relatively large number of employees have left and been replaced, the majority of employees have remained in post.