What are the effects of labor turnover on cost of production?

The Effects of Labor Turnover On Cost of Production. (Cost Accounting)

A high labor turnover results in increased cost of production due to the following reasons:

  • Cost of selecting and replacing workers.
  • Cost of training imparted to new workers.
  • Production planting cannot be properly executed and this results in production loss.
  • Efficiency of new workers becomes very low and hence productivity will also be low.
  • Increase in cost of scrap, directive work etc.

A low labor turn over in the senior grades of factory employment may not be a good thing because there will be few possibilities of promotion for the young workers who will be forced to leave the organisation for future advancement. This also results in increased labor cost per unit production.