INTRODUCTION TO EMPLOYEE TURNOVER In IT INDUSTRY

There are some keys to win over the employees in an India Software Company. The IT managers have

forgotten those soft-skills and techniques in the long-coarse of time. This is one of the reasons why

Software Companies faces high ratio of employee turnover in a firm. The survey carried on Top

Software Companies in India tells that the employee dissatisfaction level has increased up to 27% in

2007. Most of the employees complained that the pressure given by their boss and dumping work-load

in Software Outsourcing setting. Now what worst could happen in Software Company, if the company

fails in delivering positive energy to the employees and cares less about their employees. Such

companies usually lack the motivation to deliver to its worker due to ill-prospect manager in the firm.

Most of the managers find difficult to delegate the work to their employees. They are not at fault

perhaps, but even they are not talk to do the same. India Software Development needs to have an

organized structure and management so as to retain their employees for long-time. Consolidations

should not be only in the words, but all also action performed by the IT Manager.

MEANING OF EMPLOYEE TURNOVER:

Employee turnover occurs when employees voluntarily leave their jobs and must be replaced.

Turnover is expressed as an annual percentage of the total workforce. For example, 25 percent

employee turnover would mean that one-quarter of a company's workforce at the beginning of the

year has left by the end of the year. Turnover should not to be confused with layoffs, which

involve the termination of employees at the employer's discretion in response to business

conditions such as reduced sales or a merger with another company. “Employee turnover has been

defined as the rate of change in the working staff of concern during the definite period”. In other

words, it signifies the shifting of work force into and out of an organization. It is a major of extent

to which old employees leave and new employees enter into service in a given period. Employee

turnover is the cause and effect of instability of employment, apart rom being a major of the

morale and efficiency or otherwise of worker. Therefore, it can be concluded that Employee

turnover is a perpetual concern for companies. Having to replace staff at regular interval can

be headache for a busy manager and the entire resource- shaping circus of hiring and training

new employee is one that company scarcely look forward to.

FACTORS RELATED TO EMPLOYEE TURNOVER:

There are several factors which are related to employee turnover,

thus, as shown with the help of diagram as below:

The explanation of these factors related to Employee Turnover is as

under:

1.The Economy in this model, the overall economy sets the

stage for alternative employment opportunities. In a tight

economy, generally there are less alternative opportunities and

employees are less willing to leave their current jobs even if they

are dissatisfied.

2.Company culture is another strong determinant of turnover

intentions. Company culture is determined by a bunch of things

as skills, leadership, rewards/recognition, and communications.

3.Organizational Characteristics nested within an industry is

the specific organization. Within any industry, there are some

organizations that simply do a much better job of retaining

employees than others. Some of this has little to do with

enlightened practices and is simply a product ofw o rk fo r c e

demographics. All things being equal, a younger workforce

will have more job and company changes than an older

workforce. Part-time personnel are less stable than full-time

personnel and a workforce with greater average tenure will have

fewer turnovers than a workforce with less average tenure.

4.Industry Trends the Health Care industry is a good example

of how industry trends interact with the general economy. With

managed health care has come an increased focus on

profitability and cost reduction, and rapid consolidation of

hospitals. This has created an atmosphere of uncertainty and

dissatisfaction for many health care professionals.

The current good economy offers career opportunities outside of

the industry and can increase the level of turnover that might

already occur. The net effect is that turnover is very high in this

industry and there is an increasing shortage of qualified

professionals.

5.Job Characteristics one of the most researched areas is the

relationship between job satisfaction and turnover. There is a

well documented body of research that suggests the following

job characteristics are most commonly associated with job

satisfaction:

∗

Variety - Jobs that offer a greater variety of tasks are

associated with higher satisfaction levels

∗

Autonomy - Jobs that offer greater freedom and choice in

execution (i.e., empowerment) are associated with higher

satisfaction levels

∗

Identity - Jobs that offer a sense of ownership and

personal accountability are associated with higher

satisfaction levels

∗

Feedback - Jobs that offer intrinsic feedback on quality of

performance are associated with higher satisfaction levels

Defining the Employee Turnover Problem:

Global outsourcing and the astounding amount of foreign direct

investment pouring into China, Russia, and India have created

tremendous opportunities and competition for talented IT

professionals in those countries. The downside of this increased

competition is a rising rate of turnover, particularly in India.

Almost every sector in India is facing high rates of turnover these

days. A recent study revealed that employees leave either because of

compensation reasons or due to better growth opportunities.

According to NASSCOM, Indian IT-ITES industry recorded US$ 39.6

billion in revenues in 2006-07. The revenue of US$ 49-50 billion has

been projected in 2007-08 at a growth rate of 24-27 per cent. The IT

industry's contribution to GDP was 4.8 per cent in 2005-06.

Though the IT/ITES sector is booming, it is constantly facing high

turnover rates of 25% - 30%. Even the big brands are also facing the

same problem.

Below are the details of turnover rates of various players in IT sector

shown with help of diagram:-

According to the survey conducted by BES and Data Quest, Sierra

Atlantic recorded highest turnover rate (29%) followed by Kanbay

with 25% and Accel Frontline with 20 per cent.

Turnover Rates of Major IT Players

To put these turnover numbers into perspective, if a company has 100

programmers and a turnover rate of 25%, then 25 of its IT staff will

leave each year. Think about the time and money it took to find,

interview, hire, train, and coach those 25 people. Now think about

losing them and starting the hiring and training processes anew.

How do the hiring and training processes break down in

terms of total costs in India?

The typical time for advertising, interviewing, screening, negotiating,

and hiring a new employee is about two weeks. Companies usually

allot one week for programmers to become familiar with the new

business, two more weeks for technical training, and one last week for

customer training.

Now imagine a 25% turnover rate and replacing 25 of these

programmers each year. Based on a yearly salary of $15,000 for the

human resource person and $25,000 for the programmer, it would

cost an additional $63,000 annually in acquisition and employee

training costs. After considering these figures, it quickly becomes

apparent why companies are investing in strategies to prevent

turnover.

TRUTHS ABOUT EMPLOYEE TURNOVER

It is difficult to accept when organizations say they have zero attrition

rates. Companies may have healthier turnover rates, however,

there is no such thing as zero attrition. There are other such facts

about turnover, about which most of us are not aware.

Some of such facts relating to employee turnover have been

highlighted below:

Turnover Always Happens: Companies who believe in zero

attrition rates only fool themselves. This happens because

employees keep on moving due to reasons like marriage or further

education. Nothing can top these employees from moving on. So,

rather than achieving zero attrition companies should focus on

identifying whom they want to keep so that they have healthy

attrition rate.

Some Turnover is Desirable: Zero attrition is not desirable

mainly because of two reasons. Firstly, if all employees continue

to stay in the same organization, most of them will be at the top of

their pay scale which will result in excessive manpower costs.

Secondly, new employees bring new ideas, approaches, abilities &

attitudes which can keep the organization from becoming

stagnant.

Turnover Includes Costs: Turnover always includes some costs.

Consider the costs of replacing the key employee who falls in to

the category of high performers. This includes the costs of

recruitment advertisement, referral bonuses, selection testing,

training costs, etc. Moreover, turnover results in loss of time and

efforts, low productivity, loss of morale, loss of knowledge and so

on.

High Salary Doesn’t Work: Most managers assume that a high

salary package is enough to keep employees loyal to their

organization. Employees may face other problems like low job

satisfaction, low engagement levels, no recognition, poor working

conditions, less support from superiors and so on. Salaries are not

always the solution to attrition. Managers should try to identify

the roots of the problem and then find a feasible solution.

The Manager Can Reduce Attrition: Managers should take

primary responsibility for retaining their employees. Much of the

employee’s perception of job satisfaction stems from the

relationship they share with their immediate supervisor.

Managers should try to support their subordinates and give

proper feedback on performance. HR managers should work in

collaboration to make the key employees last in their organization.

6. Reducing Turnover takes Commitment: Reducing turnover

takes an investment in coaching, developing, motivating, mentoring

& listening to people. There should be universal acceptance of the

goal of reducing turnover along with top management commitment

and dedication.

REASONS FOR EMPLOYEE TURNOVER

It is not easy to find out as to who contributes and who has the

control on the attrition of employees. Various studies/survey

conducted indicates that every one is contributing to the prevailing

attrition. Turnover does not happen for one or two reasons. The way

the industry is projected and speed at which the companies are

expanding has a major part in employee turnover.

For a moment if we look back, did we plan for the growth of this

industry and answer will be no. The readiness in all aspects will ease

the problems to some extent. In our country we start the industry and

then develop the infrastructure. All the major IT companies have

faced these realities. If you look within, the specific reasons for

attrition are varied in nature and it is interesting to know why the

people change jobs so quickly. Even today, the main reason for

changing jobs is for higher salary and better benefits. But in call

centers the reasons are many and it is also true that for funny reasons

people change jobs. At the same time the attrition cannot be

attributed to employees alone.

Organizational Matters:

The employees always assess the management values, work culture,

work practices and credibility of the organization. The Indian

companies do have difficulties in getting the businesses and retain it

for a long time. There are always ups and downs in the business.

When there is no focus and in the absence of business plans, non-

availability of the campaigns makes people to quickly move out of the

organization.

Working Environment:

Working environment is the most important cause of high turnover.

Employees expect very professional approach and international

working environment. They expect very friendly and learning

environment. It means bossism; rigid rules and stick approach will

not suit the call center. Employees look for freedom, good treatment

from the superiors, good encouragement, friendly approach from one

and all, and good motivation.

Job Matters:

No doubt the jobs today bring lots of pressure and stress is high. The

employees leave the job if there is too much pressure on performance

or any work related pressure. It is quite common that employees are

moved from one process to another. They take time to get adjusted

with the new campaigns and few employees find it difficult to get

adjusted and they leave immediately. Monotony sets in very quickly

and this is one of the main reasons for attrition. Youngsters look jobs

as being temporary and they quickly change the job once they get in

to their own field. The other option is to move to such other process

work where there is no pressure of sales and meeting service level

agreements (SLA).

The employees move out if there are strained relations with the

superiors or with the subordinates or any slightest discontent.

Salary and Other Benefits:

Moving from one job to another for higher salary, better positions

and better benefits are the most important reasons for attrition. The

salary and offered from Foreign companies have gone up very high

and it is highly impossible for Indian IT companies to meet the

expectation of the employees. The employees expect salary revision

once in 4-6 months and if not they move to other organizations.

Personal Reasons:

The personal reasons are many and only few are visible to us. The

foremost personal reasons are getting married or falling in love or

change of place. The next important personal reason is going for

higher education. Most of the BE, MCA and others appear for GATE

examination or other examinations and once they get cleared they

quickly move out.

Health is another aspect, which contributes for attrition. Employees

do get affected with health problems like sleep disturbances,

indigestion, headache, throat infection and gynecological dysfunction

for lady employees. Employees who have allergic problems and

unable to cope with the AC hall etc will tend to get various other

health problems and loose interest to work.

Poaching:

The demand for trained and competent manpower is very high.

Poaching has become very common. The big companies target

employees of small companies. The placement agencies have good

days for doing more business.

The employees with 4-6 months experience have very good

confidence and dare to walk out and get a better job in a week's time.

Most of the organizations have employee referral schemes and this

makes people to spread message and refer the know candidates from

the previous companies and earn too.

Employee’s Advocate:

One of the main reasons why employees leave companies is because

of problems with their managers. An HR professional can be termed

an employee’s advocate and a bridge between top management and

employees at all levels. There is a huge gap between HR professionals

and employees in terms of understanding challenges and delivering

requirements. HR has not really understood the problems associated

with employees’ careers and jobs. The company’s overall plans and

strategies also depend on HR professionals as they voice employees’

problems and requirements. The HR department should have

genuine interest in the employees’ welfare…it is responsible for

making sure that their expectations are met. By doing this it is easier

to meet the company’s business targets.

EFFECTS OF EMPLOYEE TURNOVER

There is no set level of employee turnover which effects on the

employing organisation become damaging. Mostly it is said that

employee turnover is not good for the organizations. But employers

should remember that turnover is not that bad either. What is

required is an optimum mix of turnover, not too high-not too low. An

optimum mix of employee turnover can help in many ways.

A little rate of employee turnover may result into:

1. Bringing in new ideas and skills from new hires.

2. Better employee-job matches.

3. More staffing flexibility.

4. Facilitate change and innovation.

High rate of turnover may lead to decrease in:

1. Productivity

2. Service delivery

3. Spread of organizational knowledge

4. Interdependence of workers which creates bottlenecks in the

smooth flow of activities which affects the overall co-ordination.

5. Additional direct and indirect cost increase the cost of

production and in turn there is a reduction in the profit.

REDUCING EMPLOYEE TURNOVER

With today's baby boomer generation beginning to retire from the

labor market, many IT companies are finding it increasingly difficult

to retain employees. Turnover is becoming a serious problem in

today's corporate environment. The employment culture is changing

as well. It is now relatively common to change jobs every few years,

rather than grow with one company throughout the employment life

as was once commonplace. In addition, employees are increasingly

demanding a balance between work and family life.

Therefore, there are Seven Major Areas of Intervention that

helps to Reduce Employee Turnover mentioned below:

1. Early Interventions

2. Skill Interventions

3. Leadership Interventions

4. Communication Interventions

5. Reward/recognition Interventions

6. Job Enrichment Interventions

7. Selection Interventions

EARLY INTERVENTIONS:

The fact that large numbers of employees turnover in the first six

months of employment suggests that this is a critical time for helping

people adjust to new roles. Managing employee’s expectations should

actually start before employment.

Thus the Orientation Programs should not be a one-day event; they

should span the first three months of employment. A good orientation

program helps prevent misunderstandings, and gradually introduces

the employee into the organization. By providing just-in-time

information and training, rather than a one-day "core dump" of

information, gives better results of training efforts.

Most importantly, establish a support system for the new employee. A

good practice is to set up a "buddy" system for new employees. A

"buddy" is a seasoned employee who volunteers to "look out for the

new employee", making introductions, providing advice, and helping

avoid early pitfalls.

SKILL INTERVENTIONS:

Keep employees motivated and committed by enthusiastically

offering both training and development opportunities. On the hand,

the personal development of employees helps in employee retention.

For Example, the top-rated companies spend considerable time in

training their people, they have low turnover rates, and they have

impressive numbers of applicants per job.

LEADERSHIP INTERVENTIONS:

Better Bosses mean lower turnover. Establishing performance

expectations, providing coaching and positive feedback, and

interacting in a fair and considerate manner are all things that good

leaders do to help new employees be successful and receive

enjoyment from their jobs. To impact turnover, make sure that

supervisory promotion and training programs have interpersonal

skills as part of their focus. Measure employee perceptions of

leadership behaviors and incorporate behavioral expectations into

leaders’ performance management expectations.

COMMUNICATION INTERVENTIONS:

There are certain ways of communication intervention that helps to

reduce turnover rates, such as:

1 .Hold Open Forums: - Set up monthly or at least quarterly

forums in which employees can talk with decision-makers on

issues important to them.

2 .Improve Credibility: - Do what you say you are going to do

or offer a good reason why you cannot.

3 .Find Ways To Communicate: - Communication is the

solution to almost everything in this world. Same applies to

employee retention also, thus employers should determine

various ways of communication such as a quarterly employee

newsletter.

4 .Eliminate Fear Of Reprisal: - Use suggestion boxes as an

anonymous way for employees to speak out.

5 .Share Important Information: - Treat employees as

partners. Share important information so this might make

employees feel a sense of accomplishment or on problems that

might encourage them to go the extra mile.

REWARDS/RECOGNITION INTERVENTIONS:

Money can talk volumes, but the creative use of money is a key to

retention. Various kinds of contingent bonus strategies can be used to

help with retention, which are:-

1 .Deferred bonuses are paid out incrementally with a

significant back-end payoff for a combination of performance

and retention. This type of bonus system can help guarantee

service for a finite number of years but also address long term

retention.

2 .Performance bonuses can help an employee reach high

levels of income providing they can consistently demonstrate

superior levels of performance. This type of bonus can be very

effective if performance metrics are readily available and

additional costs are consistent with the value of superior

performance.

3 .Salary Adjustments a third option besides the use of bonuses

a regularly salary adjustments for your star performers or an

individual with key skill sets so that they are not tempted to go

elsewhere for bigger paychecks.

JOB ENRICHMENT INTERVENTION:

Increasing the job satisfaction of high turnover jobs can reduce

turnover. For individuals who have a need for growth, the following

job design strategies are associated with increased job satisfaction:

1.Increase the variety of tasks performed

2.Provide greater ownership and decision-making on how the job

is performed and hold the job holder accountable for quality of

outputs

3.Add more significant responsibilities

4.Improve the accuracy and quality of feedback on performance

SELECTION INTERVENTION:

Improved selection may be the most powerful weapon against

turnover. Selection is a preventive technique for reducing turnover.

By improving the initial fit between an individual and a job, you can

have a huge impact on turnover.

Hiring managers have become more sophisticated in identifying the

candidate whose credentials best match the requirements of an open

position. However, the right education and work experiences are not

enough to ensure employee survival, therefore, to avoid costly

turnover, today hiring managers must look beyond the candidates’

ability to perform and make sure the candidate is also motivated to

perform in the work opportunity.

EMPLOYEE RETENTION STRATEGIES

Apart from above mentioned Intervention Techniques another means

to Reduce Employee Turnover, is applying Employee Retention

Strategies. Therefore, the basic practices which should be kept in

mind in the employee retention strategies are as following:

1. Hire the right people in the first place.

2. Empower the employees: Give the employees the authority to

get things done.

3. Make employees realize that they are the most valuable asset of

the organization.

4. Have faith in them, trust them and respect them.

5. Provide them information and knowledge.

6. Keep providing them feedback on their performance.

7. Recognize and appreciate their achievements.

8. Keep their morale high.

9. Create an environment where the employees want to work and

have fun.

These practices can be categorized in three levels of management i.e.

Low Level, Medium Level and High level which is shown with

the help of Flow Chart as under:-

HOW TO RESTRANIT EMPLOYEE

TURNOVER

Employee Turnover has become a major concern for organization

today with labor shortage and competitive pressure making retention

of key employees a strategic issue, thus, following are the ways to curb

employees in an organization as under:

Money Is Not Everything:

Although the importance of higher packages is slowly diminishing,

among fresher or laterals with less than three years of work

experience, money is still considered to be the highest priority.

Employees want not only work recognition, but also extra perks." A

number of professionals are looking at more challenging jobs. "In

several cases, faced with a choice between more money and a

challenging job, employees have opted for the latter as it allows them

to learn new technology and increase domain expertise." People

analyze the training programmes of prospective companies with those

of their current organization, which means that how an organization

grooms an employee is weighed to a greater extent. This is because

they know that developing next-level skills will keep them ahead in

the job market, and finally result in better compensation. They also

look for a job with higher levels of responsibility, better learning

opportunities.

Vision and Objectives:

The next level of communication, a crucial part of retention, starts

with acquainting employees with the company’s vision and objectives.

Organizations successful in retaining employees clearly pass on their

goals and achievements. Conducting regular meetings and updating

employees, especially new entrants, about the company’s status and

achievements is a must.” They should concentrate on leadership and

brand building as people prefer to be associated with a brand. The

youth should feel proud to be a part of the billion-dollar industry.

Mentoring and handholding new recruits from day one to four

months are important tasks; during this period, they should be

familiarized with the culture of the company. It is at this time that

new entrants experiment with different options. Hence they should

be exposed to the best values the company has.” If they are informed

about regular happenings in the company, employees will be

confident about the future and not try to look for better options.

Treat Employees like Customers:

Even while companies strive to understand which organizational, job,

and reward factors will contribute to holding back employees,

industry experts have found several loopholes at the top management

and HR management level. Companies should have a similar

approach to employees and customers.

If a company strives to retain an employee in the same way it tries to

retain a customer, him leaving the organization could be out of

question.

Since software professionals have different priorities at different

points of time, organizations need to structure their offer-mix while

recruiting new hires, as well as promoting potential ones.

Communication is the foundation for the entire process of managing

attrition. This communication begins right from recruitment. In cases

of peer pressure, an employee aims to join a well-known company.

This could be achieved by brand building, which attracts the right

talent and helps in retention as well.

Understanding an employee’s needs at various levels is a

recommended HR practice.

Consider Feedback:

It is important to take feedback from employees through different

means and work with the HR department to iron out differences. As

industry experts point out, feedback can be got in two ways—during

the employee’s tenure, and through exit interviews. Inputs can be

secured from existing employees through various employee

relationship management tools. The Wipro Listens and Responds

initiative at Wipro aims to capture the concerns and grievances of its

employees. “The feedback we get through this tool will be analyzed,

and action will be taken on it. Our employees are very excited that

their feedback is being taken seriously,” says Sahoo.

Exit interviews help management learn the reasons why employees

leave the company; based on their revelations, the organization can

address the problems of existing employees, thereby curb attrition.

Spend Time Developing and Benchmarking Incentives:

Whenever the demand for a professional arises in a particular field,

the perks associated with the job start to pile up. Standard perks for

an India-based "fresher" (a new entrant in the IT services industry

with little work experience) typically include free transportation,

educational assistance, healthcare benefits, performance-based

bonuses, onsite cafeteria, stock options, and interest-free loans to

absorb the cost of relocation or maybe to finance the purchase of a

two-wheeler. According to Wipro's web site, its employees even have

access to an agency that will handle such "domestic chores" as paying

bills, thereby giving IT workers more free time.

IT service providers have to offer innovative compensation and

benefits—or risk losing valued employees to competitors. Nonstop

evaluation and benchmarking are "need to do" activities for IT

managers.

Change Locations:

The high prices and resource crunch in top-tier Indian cities such as

Bangalore and Mumbai have led many companies to execute

alternative location strategies. Many vendors are sending work to

tier-two cities (Hyderabad or Chennai) or even tier-three cities

(Noida or Chandigarh), where labor and real estate costs as well as

attrition may be cut in half. Such benefits come at a price: The

infrastructure quality lags that of more advanced cities, and the

search to find qualified people may take longer.

Rotate Employees:

Employees who don't feel challenged by their work often leave. In

response, companies such as TCS have programs that rotate

employees into different disciplines about every two years and expose

them to new locations, projects, and technologies.

Offshore employees are asking for a clear career path with increased

responsibility and frequent recognition of achievement. Established

U.S. and European multinational companies have long had learning

programs that set expectations for performance goals such as learning

a particular tool or proprietary software. Companies practicing off

shoring need to provide new challenges and opportunities for skills

development through training or job rotation. It may become the only

reason your best employees stay with you.

Just Ask: Are Your Employees Satisfied?

Retention is inextricably linked to employee satisfaction, so it pays to

periodically survey employees —hopefully before their exit interviews

—about job satisfaction issues, and act on the data gathered. The aim

is to determine why some employees depart and some remain with

the company, and to define the traits of productive, successful

employees. Many companies examine the reasons employees leave,

which don't reveal as much as the reasons they stay.

An important aspect of implementing a retention program

understands that it should not be one-size-fits-all. If incentives are

meant to keep employees happy, then they truly have to be designed

with the employee in mind. Too often, employers and employees

disagree on what constitutes a good incentive. For example, a

company might reward a father with three young children a monetary

bonus as thanks for working overtime for five months straight. To the

father, however, days off might have been more attractive, since they

would have allowed him to spend time with his family.

Knowing your employees and personalizing rewards makes a

difference. The global workforce has different, individualized needs,

and organizations should tailor incentives for their employees if they

want to retain them. If your company doesn't bother, don't be

surprised if workers head for the door as soon as year-end bonuses

are handed out or stock options vest.

Spend More Time Recruiting:

With huge projects ramping up within exceedingly short windows, it

can be hard to convince management to allot more time to the

recruiting process. However, it's difficult to retain good employees if

the company doesn't have a process to hire the right people in the

first place. Simple measures, such as incorporating skills tests that

relate directly to the job in question, can help companies to determine

whether the applicant is indeed an expert programmer or merely an

intermediate programmer. Having employees interview candidates

also may increase the chances of success, as these employees can

better identify potential personality clashes that HR personnel may

not spot.

EMPLOYEE TURNOVER COST CALCULATION

The impact of employee turnover on company performance is often

understated by organizations. This describes how the cost of turnover is

can be calculated using some basic organizational parameters. The purpose

of this document is to provide talent cost of turnover calculator with insight

into how costs are calculated and the reasons why certain costs were

include or excluded form the calculator. The calculator should only be used

as a guide in understanding the impact of turnover on a company. If the

desire is to understand the true cost of turnover then it is suggested that a

greater degree of analytical work is undertaken.

The following table can be helpful to calculate the cost of employee

turnover per week or per month:-

Separation Cost/Employee Detachment Cost:

Cost of Exit Interview… … … … … … … … … … … … … … … … … … … … … … …

+ Cost of Termination Time… … … … … … … … … … … … … … … … … … … … …..

+ Cost spent in Administrative Procedures… … … … … … … … … … … … … … … …

+ Increased Unemployment Tax… … … … … … … … … … … … … … … … … … … …

Cost of Vacancy:

Cost of Additional Overtime… … … … … … … … … … … … … … … … … … … …...

+ Cost of Additional Temporary Help… … … … … … … … … … … … … … … … …...

- Wages and Benefits saved due to Vacancy… … … … … … … … … … … … … … …

Cost of Replacement:

Pre Employment Administrative Expenses

+ Cost of Attracting Applicants

+ Cost of Entrance Interviews

+ Testing Costs

+ Staff Costs

+ Travel and Moving Expenses

+ Post Employment Information Gathering & Dissemination Costs

+ Cost of Post Employment Medical Exams

Training Costs:

Cost of Informational Literature

+ Formal Training Costs

+ Informal Training Costs

Employee Performance Differential:

Differential in Performance Costs/Benefits

TOTAL TURNOVER COSTS PER EMPLOYEE

MEASUREMENT OF EMPLOYEE TURNOVER:-

Three different methods are used for measuring the Employee turnover

rate:

1) SEPARATION METHOD:

It is computed as: -

Number of separation in a period

------------------------------------------X 100

Avg. no. of worker

2) REPLACEMENT METHOD:

It is calculated as:-

Number of replacement in a period

------------------------------------------- X 100

Avg. no. of worker

3) FLUX METHOD:

It is calculated as:-

Number of separation + Number of replacement

----------------------------------------------X 100

Avg. no. of worker

BENEFITS OF TURNOVER

Turnover is not bad always if it happens in a controlled manner.

Some turnover is always desirable and necessary for organizational

growth and development. The only concern is how organizations

differentiate “good turnover” from “bad turnover”. The term “healthy

turnover” or “good turnover” signifies the importance of less

productive employees voluntarily leaving the organization. This

means if the ones who have left fall in the category of low performers,

the turnover in considered being healthy.

Turnover rates are considered to be beneficial in some

ways:

1.If all employees stay in the same organization for a very long

time, most of them will be at the top of their pay scale which

will result in excessive manpower costs.

2.When certain employees leave, whose continuation of service

would have negatively impacted productivity and profitability of

the company, the company is benefited.

3.New employees bring new ideas, approaches, abilities &

attitudes which can keep the organization from becoming

stagnant.

4.There are also some people in the organization who have a

negative and demoralizing influence on the work culture and

team spirit. This, in the long-term, is detrimental to

organizational health.

5.Desirable turnover also includes termination of employees with

whom the organization does not want to continue a

relationship. It benefits the organization in the following ways:

o

It removes bottleneck in the progress of the company

o

It creates space for the entry of new talents

o

It assists in evolving high performance teams

6.There are people who are not able to balance their performance

as per expectations, lack potential for future or need

disciplinary action. Furthermore, as the rewards are limited,

business pressures do not allow the management to over-

reward the performers, but when undesirable employees leave

the company, the good employees can be given the share that

they deserve.

However, some companies believe turnover in any form is bad for an

organization for it means that a wrong choice was made at the

beginning while recruiting. Even good turnover indicates loss as

recruitment is a time consuming and costly affair. The only positive

point is that the realization has initiated action that will lead to

cutting loss.

SUGGESTIONS

Employee turnover for instance may include cost that results from employees’ slower work pace

and increased absenteeism. A company puts in maximum investment towards developing its

manpower in order to get best output which results in high profit and productivity

for the company.

Following suggestions are given to decrease the percentage of Employee Turnover in IT Industry

as under:

1. Clearly define targets and goals. Setting a time frame and numbers creates impetus for action,

thus, MBO technique can be applied so that employee set their own goals.

2. The grievance redressed procedure can be improved.

3. Better pay package for deserving employee can be considered for their retention.

4. Implement careful and strategic planning for targeted individuals’ career development. Being

identified is not enough. Consider potential benefits of encouraging informal mentoring.

5. Ensure there is strong leadership and commitment from senior management. Initial and on-

going personal involvement of the Chief Executive is crucial to success.

6. Integrate succession planning into business and diversity objectives. A clear link between

business goals and the desired results of the succession planning will assist in gaining

commitment from the organization and staff. To be successful it must be portrayed as a

core issue.

7. The 3 R’s that is Recruitments, Retentions, and Retirement benefits should be properly

imposed.

CONCLUSION

The ever-increasing tangible and intangible costs of replacing an existing employee with known

skill sets and knowledge of the organizational culture would leave any HR executive with

sleepless nights. But the fact remains that however satisfied they may seem employees leave. So

employee turnover is sometimes referred to as a symptom of many hidden problems. The main

objective of this report is to study vital causes of employee turnover and their effects on the

IT industry and to discover those hidden roots of the trouble to reduce such employee turnover.

Therefore, the following points have been concluded:-

1.Inculcating values like trust and accountability among the employees is the best way to hold

back talents in an organization

2. Employees leave not always for higher salaries. In fact, there is a limit to the salaries an

employer can afford to pay even its best performing employees. Rather, the major issues lie

with the unarticulated needs of the employees.

3. Employees often expect a sense of worth from peers, seniors and other departments. They

want to trust the senior management and also walk the talk when it comes to living the

vision and mission, as well as the other promises communicated.

4. They expect the management to get a buy-in from them on critical decisions that effect the

organization. With all these they also, quite naturally yarn for a well-planned career growth

path.

5. To ensure that their skills and roles are aligned to that of the organization, employees need to

be trained through role transitions. This allows employees change their career path as per their

skills and future goals.

6. The human resource department has a critical role to play in this organization-individual

competency alignment. The responsibility of predicting process and individual

performance levels based on industry trends is entirely on the HR team. They need to work

on the existing data on performances and generate actions plans for individual level

performance management.

7. Finally, employers need to take care of all the factors that affect an employee, whilformulating

effective employee retention programmed. The factors can be encapsulated as Fit, Trust,

Confidence & Trust, and Listening.