Labour turnover is the rate at which employees leave an organization. It can be both functional and dysfunctional. It is functional if employees’ departure results in increased value for the company (Cascio & Boudreau, 2008, p. 70). On the other hand, it is dysfunctional if it results in reduced value for the business. There is no ideal turnover rate for all companies. The typical turnover rate for each company depends on the effect of the turnover in the company’s workforce. For example, Columbus Custom Carpentry experienced its excellent turnover it allowed the company to replace high-paid workers with lower-paid new employees. However, it became dysfunctional when it led to the departure of the new employees, which automatically increased recruitment, selection, and training costs because of the higher frequency with which the three functions were conducted.
Businesses experience labour turnover because of several reasons, some of which are internal while the others are external (Shamsuzzoha & Shumon, n. d., p. 65-66). The internal factors include the experience and skills of the employees, the training and development function of the company, the wage structure, opportunities for promotions and recognition, and the characteristics of the job. The external factors include the availability of better-paying jobs elsewhere and the state of the economy. A bad match between the employees’ skills and the jobs is a primary factor for turnover at Columbus Custom Carpentry. Workers from the manufacturing department are made to help in the warehouse department as it lacks enough employees. Forklift drivers are forced to do crating work that they are not trained for. An unequal wage structure is another of the causes of labour turnover in the company. The company has better wage structure for manufacturing department workers than for the warehouse staff. As such, warehouse staff transfers to the manufacturing department whenever chances arise. The company has lost its high-paid workers, most probably to other leading enterprises in the industry.
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Finally, the mismatch in the standard of equipment and facilities within the company could also be a cause for turnover. For example, according to the warehouse manager, the manufacturing department has the best equipment within the business. Employees may find it difficult to put up with the inconvenience of the lack of proper working facilities for a long time.
Pay is the primary cause of interdepartmental issues at Columbus Custom Carpentry. Workers in the manufacturing department are paid higher wages than their counterparts in the warehouse department. As such, the warehouse department workers actively seek chances to transfer to the manufacturing department, thereby leaving the warehouse understaffed. Employers consider various aspects when determining the pay rates for their employees. The ability to pay is one such factor, and it dictates that companies should afford their wage structures during both good and bad financial times (Sims, 2002, p. 254). Pay is also affected by legal constraints that regulate the salaries, work hours, and recordkeeping. Union and Union issues also affect employees’ pay. Unions bargain and negotiate pay for their members. The company’s internal equity/labour market is another of the factors influencing pay (Sims, 2002, p. 254). Employers must ensure that their pay structures motivate their employees to remain in the organization and to contribute towards the achievement of goals and objectives. Finally, pay is affected by the employers’ external equity/labour market. The market forces of demand and supply have a significant impact on a company’s wage structure. However, the worth of the job seems to be the primary pay determinant at Columbus Custom Carpentry. The company pays higher wages to its manufacturing department workers than to the warehouse employees.
Internal compensation equity refers to the comparisons made by employees within an organization regarding their pay in comparison to what others within the organization are paid. It exists when pay differentials between different jobs within the organization are proportional to the internal value of the jobs performed. The value of the jobs is based on their importance according to the perception of the employers. Additionally, job value is determined by factors related to the job such as education and training, experience, working conditions, and the level of responsibilities. Inadequate internal equity would have several adverse effects on the company. For example, it would lead to conflicts among employees who perform similar jobs but whose pay rates are different (Sims, 2002, p. 249). It would also lead to declined employee morale and productivity, and feelings of mistrust and anger among the employees. Weak internal equity would also result in legal actions especially if the compensation inequality is thought to be based on illegal discrimination such as gender and ethnicity. Pay grades can be used to prevent internal compensation equity problems. Companies should establish different wage structures for the various levels of duties and responsibilities such that employees high in the duties and responsibilities scale receive high pay and vice versa. According to Sims (2002, p. 249), employees expect that workers high in the organizational structure receive higher compensation than those in lower levels.
External equity refers to the situation whereby the employer pays wages that are proportional to those prevailing in the job market (Sims, 2002, p. 249). The market forces of demand and supply are the primary determinants of wages in the external market. The market forces defer from market to market depending on factors such as geographic location, industry sector, unions status, and the education, skills, and levels of experience of the available workforce. Weak external compensation equity would lead to a decline in employee morale and productivity. They would feel underpaid as compared to employees performing similar tasks for other companies and would actively seek opportunities to move to such other companies. Weak external compensation equity would also hinder a company’s ability to attract highly educated, skilled, and experienced employees (Sims, 2002, p. 249). Such employees would find the below-average wages at the company unattractive and would prefer taking up job offers from other better-paying employers.
- Cascio, W., & Boudreau, J. (2008). Investing in People. Upper Saddle River, N.J.: FT Press.
- Shamsuzzoha, A., & Shumon, R. Employee Turnover-a Study of its Causes and Effects to Different Industries in Bangladesh (1st ed.). Retrieved from http://www.fvt.tuke.sk/journal/pdf07/3-str-64-68.pdf
- Sims, R. (2002). Organizational Success through Effective Human Resources Management. Westport, Conn.: Quorum Books.
