Letter report on Labor Turnover
January 16, 20___
Mr. Aftab Ahmed, President
Taqi Chemical Corporation
Subject: Report on High Labor Turnover
Dear Mr. Aftab:
I am pleased to submit the report as desired by you. My report is in accordance with your instructions. It includes overview of and reasons for leaving of the labor, conclusions, and recommendations. The reasons for leaving include voluntary leaving, management action and unavoidable factors.
The details of the findings are in the lines to follow.
The company, established 50 years back, manufactures several types of chemicals for local and foreign markets. The strength of the employees is two thousand. The company has been facing an increasing rate of labor turnover every year. The types of the employees working in the company may be divided into three categories, unskilled, semiskilled and skilled. During 1988 the number of employees who left the company was as many as 200. The over all labor turnover for the year 1988 was 10 percent which was computed as follows:
Total separation per year
_______________________________ X 100
Average number on payroll for the Year
____ x I00 =10%
The separate turnover rates of unskilled, semiskilled and skilled laborers are 2, 3 and 5 percent respectively. Ten percent turnover is very alarming since it has resulted in great financial and non financial losses. The situation was investigated into, and it was concluded that the high labor turnover may be attributed to three reasons.
1. Voluntary leaving
2. Management action
3. Unavoidable factors
After having informal discussions with the top management, existing employees, and having studied the company’s records, I came to know that the employees left the company voluntarily owing to the following reasons.
Dissatisfaction with the job
Dissatisfaction with the pay
Dissatisfaction with the working conditions
Dissatisfaction factors are the aftermath of misutilization of labor and their wrong placement.
The personnel record of the employees for the last five years show a significant number of employees who were separated by the management action. Last year 80 out of 200 employees, which is 40 percent, were either dismissed, discharged or laid off. The management action was taken on the following ground:
Unsuitability of the employees
This fact proves the inability of the management to follow a sound recruiting policy.
Others were unavoidable reasons for which the employees had to leave or were forced to leave. They are as follows: Long illness, accidents, retirement, leaving the city or migration, death, domestic reasons, marriage (of women), pregnancy, or military service.
The rate of labor turnover under this category was only ten percent that is only 20 employees out of 200 left the jobs in 1999.
GETTING RID OF THE PROBLEM
The following is the summary regarding the rates of labor turnover Jn 1990 under different categories.
Total number of on going employees 200
Overall labor turnover rate l0 % of total strength
Skilled labor turnover 5% -do-
Semiskilled labor turnover 3% -do-
Unskilled labor turnover 2% -do-
Voluntary leaving 50% of total separation
Management action 40% -do-
Unavoidable 10% -do-
The above statistics show that skilled and semi skilled laborers have more tendency to leave. And their leaving the jobs is more costly than the leaving by the un skilled employees due to high cost of hiring and training. The rate of voluntary leaving is the highest of all other reasons.
The high labor turnover has resulted in the following costs.
1. The cost of hiring and training of the new employees
2. Cost of over time work done by the remaining workers to maintain production until the new employees join their duties.
3. Loss of production during the interval between separation and hiring of the employees.
4. Underutilization of machinery, equipment, implements and tools during separation, hiring and training period.
5. Adjustment period of new employees.
In the light of the above analysis, I will recommend that the company should take necessary offensives immediately to check the high labor turnover. The company should give careful attention to the hiring policy of executives, supervisors, and managers. It should fully utilize the existing employees’ experience, expertise, education, and ability. Managers at all levels should have opportunity of participation in management decisions. The company should introduce management by objective which will help the company to improve the morale and check the high labor turnover, improvement in working conditions is necessary. Revision of pay scales is also imperative.
Controlled and small turnover will reduce the cost, and promote company stability. Small turnover is rather desirable because it is necessary to maintain dynamism and flexibility. New blood technology methods and ideas flow into the company by filling vacant position from external sources.
I am sure the findings of the report will be of great help to you in taking the company out of crises. Should you have any questions, please don’t hesitate to call me to discuss them with you