Productivity is one of the key determinants in relation to the performance of an organisation. There are a number of factors on which this productivity of a firm depends and among them employee’s turnover is one of the most important which challenges the smooth running of business. Not only human resource professionals but also the issue of labour turnover has attracted the attention of senior management and industrial psychologists. Human resource management (HRM) comprises allocation of cost in order to come up with a counter approach (Shamsuzzoha and Shumon, 2007). Companies have to incur a lot on employing new workers such as organising induction and training, developing and retaining them within companies. Hence, it is the responsibility of managers and human resource professionals to retain employees and minimise workers’ turnover. With the advent of globalisation, the intensified competition has made it necessary for organisations to develop new products and formulate new course of action based on the strategies created by employees (Samuel and Chipunza, 2009). Hence, it illustrates the importance of employees towards an organisation and is one of the irreplaceable factors of production (Ongori, 2007). Estimates reveal that 15% of the employees in United States quit their jobs while the rate is between (10-15) percent in OECD countries (Brown, Garino and Martin, 2007).
This paper critically evaluates the reasons behind employee turn-over with a detailed explanation of the advantages and disadvantages of labour turnover. Finally, recommendations have been presented in the paper which can be utilised by managers to retain employees.
Organisational factors and job related issues are the two attributes explaining turnover rate (Arokiasamy, 2013). If there is instability within the management structure in an organisation, then employees are likely to shift to another company where they can get a stable working environment. It has been commonly observed by scholars that organisations whose production is inefficient face high turnover rate. If an organisation is able to offer stability and career growth based on the performance of the employees, then the company can expect to have lower attrition rate. Economic factors play an important role in determining a company’s turnover rate (Arokiasamy, 2013). If a company in the market offers better salary and other benefits, then the firm is likely to receive more number of job applications because people always want to improve their standard of living and little higher than the market wage rate can help an individual to attain this objective.
Job Satisfaction: Literature on work culture and employees’ behaviour has presented a direct relationship between job satisfaction and resignation. This implies that employees who are dissatisfied with their current job are more prone to quit their jobs. However, the strength of this depends on the rate of unemployment prevailing in the market. If the rate of unemployment is low in the society then the relationship is high (Saeed et al., 2014). However, when there is high unemployment, people will tend to stick to their jobs even if they are not satisfied with their jobs because they have fewer alternatives.
Salary and Fringe benefits: An individual expects that in exchange for his or her services rendered in an organisation he or she will receive fair compensation in the form of salary. Wage is used by many organisations for measuring the performance of workers. Employees are required to prove their ability in order to stay longer at work otherwise they have to face the risk of losing their job because when organisations are paying, they expect that workers would be exerting 100% effort. Wage has a direct effect upon job satisfaction and many companies use payment as a means of rewarding achievement of workers (Dale-Olsen, 2006).
Fringe benefits can be defined as the indirect compensation which is provided to the employee or group of workers on the basis of organisational membership (Ongaki and Otundo, 2015). It has a direct impact on retaining employees. Companies are required to plan accordingly which benefits they are going to provide employees so that workers not only stay in the organisation but also improve their performance and contribute towards the success of the concerned company (Dale-Olsen, 2006).
Convergence of individual and company goals: The main task of the HR professional is to select job applicants who fit perfectly to the job role such that, there is a convergence between individual and organisational goals. Employees expect that the organisation would understand their needs. If the company fails to understand the causes of inconvenience for the employees, then they may shift to different job raising the turnover rate for the company. Almost half of the employees quitting their jobs state that, wrong fit is their reason for changing their employer (Curran, 2012).
Available alternative opportunities: It is an external factor which makes it difficult for organisations to retain their employees. If in the market there are vacancies in the organisations then will provide lucrative benefits so that they get more workers to fill in while making it easier for the workers to shift jobs quickly. Another external factor is unemployment rate which affects voluntary turnover (Arokiasamy, 2013). Besides external factors, researchers have observed that educational background plays an important role in triggering perception towards employment opportunities. Higher educated individuals may think that it is one of their strengths against less qualified workforce which allows them to choose from more alternative jobs.
Unionisation: Many scholars have illustrated that organisation where labour unions are operating, have lower rate of employee turnover. This result is achieved because labour unions are able to secure better working conditions, which make it attractive for the workers to stick to their current jobs (Bhatia, 2008).