Labour turnover - what's happening?

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Every year EEF produces a range of valuable benchmarking data. This can aid businesses in identifying any emerging labour-related challenges – and indeed opportunities – within their organisation.

First up this year, we have annual data on labour turnover – this provides information on churn in the workforce.

 

What is labour turnover?

It’s a calculation that any firm can make looking at the ratio of people leaving an organisation (for reasons that could include retirement, redundancy or people choosing to move onwards and upwards for their careers), relative to the total headcount over the year.

 

In 2016 the proportion of the workforce, across the companies EEF survey, that left or changed employment was 14%. This was lower than the 6-year high turnover rate – 16.1% - recorded in 2015, but higher than that seen through the post-financial crisis period.

 

Here are a few trends worth noting:

  • There is some difference in churn in the manual and non-manual workforce. In 2016 we see turnover rates in non-manual employment coming in slightly higher than for those in manual occupations.
  • Labour turnover in companies operating in the manufacturing sector is lower than that outside of manufacturing with average rates for 2016 coming in at 13.2% and 19.8% respectively.
  • Smaller companies, with 100 or fewer employees, have a lower churn rate across their whole workforce than larger companies.
  • Across all employees, labour turnover rates were lowest in the machinery and metals sectors in 2016.

 

What’s driving changes in labour turnover?

Last year we noted that the increase in labour turnover pointed to a normalisation in labour market conditions, with more hiring taking place across the industry and employees having more confidence to take their skills into new vacancies.

While business conditions across the industry continued to improve through 2016 and there was a particularly strong end to the year, this trend is likely to have persisted in some sectors. However, a couple of other factors could also have caused the rate of churn in the labour market to slow slightly.

The first is that the pick-up in business activity, together with the persistent skills problems across all manufacturing sectors may have prompted manufacturers to offer packages which encourage greater levels of retention within their business.

A second potential factor is, of course, Brexit. The uncertainty associated with the process of leaving the EU may make some employees more reticent about looking for new employment opportunities; instead opting for the relative security of their existing employer.

There are a couple of other trends that our survey hints at, but is not conclusive. The survey results suggest that companies with a low proportion of workers aged over 50 years old exhibit signs of higher turnover rates. This could be a function of younger workers having higher levels of mobility as they develop their careers and, at the other end of the spectrum, older workers having a higher propensity to remain with their existing employer.

However, if there are significant differences in turnover rates across age brackets companies may wish to review the quality of their training programmes and development opportunities. And for older employees, ensuring that skills are keeping pace with the requirements of the business.

The next benchmarking release will focus on absence rates. You can find out more by contacting our Information and Research team at research@eef.org.uk

 

 

Author

Chief Economist

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