The cost of labour turnover is the monetary value of the loss of output and the cost of services involved in dealing with labour turnover and labour replacements.
(1) Preventive Costs :- Preventive costs are incurred to keep the labour turnover minimum. These costs are the costs of benefits extended to the working force for keeping them satisfied so that they do not leave the organisation.
These costs comprise the expenditure on the following:
(i) Safety measures;
(ii) Welfare amenities to workers like medical, housing, recreational and educational facilities free of cost or at subsidized rates;
(iii) Good retirement benefits;
(iv) Introduction of job evaluation and merit rating to introduce fair wage structure and for payment of incentives and suitable merit awards to skilled and competent workers;
(v) Selection and training on scientific basis.
(2) Replacement Costs :- Replacement costs arise from replacement of labour.
These costs include:
(i) Cost of selection including cost of advertisement of the job, interviewing the candidates, training etc. ;
(ii) Loss arising from inefficiency like higher spoilage of materials, outputs and time;
(iii) Loss due to machine breakdown due to mishandling of machineries;
(iv) Increase in overhead costs due to wastage, spoilage, production of inferior goods etc.;
(v) Cost of additional supervision for training the new workers who have little or no experience in production function.