accounting for labour turnover

Labour turnover means the rate at which the employees leave our company and join another company. Higher the labour turnover - higher the cost of the company. There are many reasons for labour turnover :
1. dissatisfaction
2. better opportunity elsewhere
3. personal family reason
4. unfair treatment
5. lack of growth in the present company
etc.

The Cost of Labour turnover can be studied under the following two heads :
(i) Preventive costs,
(ii) Replacement costs,
Preventive Costs :
These are the costs which are incurred to check excessive labour turnover. The purpose of incurring such cost is to keep the workers satisfied. These costs include :-
(a) Cost of providing housing, medicals, recreational facilities to workers,
b) Cost of revision of grades and scales of pay,
c) Cost of providing good working conditions.
(d) Cost of providing educational facilities to the children of the workers,
e) Cost of providing perquisites and other bnenefits
f) Cost of safety measures against working hazards.
g) Cost of providing other welfare facilities.
Replacement costs :
Replacement costs mean the costs that arise from the replacement of labour. Replacement needs selection, appointment, training etc of new workers. Thus replacement costs include :-
a) cost of recuitment of new workers,
b) cost of training to new workers,
c) Loss arising from inefficiency of new workers like higher spoilage of materials and outputs, breakage of tools etc.
d) Cost of additional supervision for new workers,
e) Loss due to interruption in production,
f) Decrease in profit due to loss of production.
Treatment of cost of labour turnover :
The cost of labour turnover is not a direct charge to any job or workorder. So, it is to be treated as an iterm of overhead expense. As such, the preventive cost of labour turnover should be apportioned among different departments on the basis of average no. of exployees in each department.
Replacement costs may be either charged directly to the department where replacements take place or these costs may be distributed among different departments on the basis of the actual no. of workers replaced in each department.