Analyzing the Effect of Employee Turnover on Company Profitability

This report investigates the relationship between employee turnover and company profitability, focusing on 30 ASX-listed companies. The research highlights the significance of employee retention, emphasizing how it directly impacts a company's financial performance. The study reviews existing literature, collecting data on employee turnover rates and net profits from the selected companies. The analysis utilizes statistical tools to measure the correlation between employee turnover and profitability, with findings suggesting that increased employee turnover leads to decreased profitability. The report also explores the importance of employee engagement, motivation, and training in enhancing retention rates. It concludes by emphasizing the need for organizations to prioritize employee well-being and create a positive work environment to maximize profitability.

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Running head: THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF
COMPANY
THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
Name of the Student
Name of the University
Author’s Note

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
Executive Summary
Profitability is dependent upon the performance related cost that gets incurred due to
services of any company within its prevailing market and hence there exist significance
importance of employee retention in any organization. Enhancing the willingness within the
employees which made them motivated towards their commitment for the organization is
essential. Today's productivity and hence profit is a crucial aspect of concern for the of
Companies to boost their employees as well as keep them motivated with innovative approach
and enhancing their involvement towards focused and efficient work culture.. When employees
are satisfied then their productivity rises and consequently the overall performance of the
company. It is been found from the information obtained from the 30 ASX companies that with
the increase in employee turnover there is a decrease in the profitability of the companies while
when the reverse happens then the productivity rises. The obtained results encourages a research
that may quantitatively investigate upon the prevailing state of relationship that exists between
the employee turnover and the profitability of the 30 ASX companies. The proposal focused on
retention of employees since it is an impactful factor in determining the performance level of the
company in the long run.

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
Table of Contents
Executive Summary.........................................................................................................................1
Introduction......................................................................................................................................4
Research Aim...................................................................................................................................4
Research Question...........................................................................................................................4
Literature Review............................................................................................................................4
Data Collection Methodology..........................................................................................................8
Data analysis....................................................................................................................................9
Gantt chart.....................................................................................................................................12
Conclusion.....................................................................................................................................13
References......................................................................................................................................14

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
List of Tables & Figures
Figure 1: Employee Turnover vs Profitability...............................................................................11
Figure 2: Gantt Chart.....................................................................................................................12
Table 1: List of 30 ASX companies................................................................................................9

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
Introduction
The study of the research focuses upon the critical analysis of the employee retention and
profitability of the company that are listed from dirty top ASX companies. The major aspects
illustrates the importance of employee turnover or in other words the importance of retention of
employees as well as its subsequent effect upon the profitability of the companies (Ahammad,
Tarba, Liu & Glaister, 2016). There exist factors that influence the employee retention and hence
singer profitability due to the impact of changes in employee retention is a major aspect of
concern to be researched. The implication of the research study lies in identifying the
effectiveness of employee retention in order to ensure profitability companies.
Research Aim
The major objective of the research can be highlighted as follows:
1. To incorporate the effectiveness of employee retention upon the profitability of Companies.
Research Question
The research question can be incorporated as follows:
1. How employee retention does renders its effect upon the profitability of a company?
Literature Review
The review of literature incorporates the importance of employee retention and how it is
being found to influence the profitability of any organization based on other secondary sources
that has executed their research and revealed their findings on the related aspects of employee
turnover and labor inputs followed by their impact upon profitability. Different journals, articles,
books and online sources are effectively reviewed on this respect to fetch out the relevant
findings on the aspect of employee retention and its impacts upon the profitability of companies.

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
According to Kumar & Pansari, (2016) the aspect of profitability is a matter of concern
for any company. Every company significantly delves into the aspects of profitability and the
factors that affect it. Employee retention is one of the factor which affects profitability
significantly the reason that the willingness of the employees to engage towards the company's
performance impacts up on the profitability of that company. The productivity gas increases
when the employee engagement takes place by willingness of the employees. It is being
highlighted in the paper, that the overall productivity company is clearly dependent upon the
employee engagement and the commitment of the employees towards enhancing the company's
performance in terms of productivity which as a consequence raises the profitability.
According to Kundu & Gahlawat, (2016) the profitability of the company is ability to all
competitive advantage in the market by that particular company through raising the efficiency of
its deployed products and services into the market. Notably, the paper highlights of fact that to
execute the objectives of enhancing efficiency it is important that the employees of the company
should work based on their optimal ability and obedience towards the company rather than
forced obedience. This will increase the involvement of the employees as well as will lessen
employee turnover. Since the employee retention increases the company will be able to utilize
the skilled labor force overtime for the long run. This will ensure the stability of the company
and hence profitability will be positively impacted.
According to Prentice, (2016) employee retention has number of implication towards the
profitability of any organization. It may happen that the impact of labor inputs effects
organizational profitability however improving the retention of employee’s insurance customer
loyalty, raises organizational profitability secures organizational objectives in the long run. Paper
highlights of at that it is important to be able to keep the bottom line of any organization healthy

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
strengthen wear engagement towards all the factors cute car seat ability of any organization. It
was depicted by the paper 26% of high revenue employee raises the employee engagement by
nearby 20 % on an average. Understand for any organization that highly engaged employees
with a company earns nearby 13% terms for the company. The paper revealed the fact that the
revenue growth percentage is accompanied by fashion more engagement by the employees.
However disengaged employee’s impacts the revenue growth negatively by monotonically
decreasing the revenue growth by 15% which makes it lower than the industry average. Notably,
profitability of organization are results of the effort of the employees and to ensure employee
involvement commitment towards organizational objectives it is important to maintain effective
employee retention. This will not only raise the employee engagement but also will be the major
factor that influence the employee turnover by retaining more number of skilled employees.
According to Simons et al., (2017) the amount of profit loss due to theft or shrinkage gets
reduced if the employee retention gets increased. Notably it was being found that nearby 27%
drop in the shrinkage of profit as compared to the business unit takes place when there is 25%
list of employee retention huge amount of money. The paper highlighted that employee turnover
has twofold impact upon profitability. Firstly in replacing an employee can cost one and half
times of the salary while once an employee has been replaced the new employee consumes a
period of time to adjust with the organizational rules and to become productive. Profitability
depends not only on the sales of the goods and services new employee is able to generate greater
amount of revenue with respect to per unit of cost that is being incurred by the organization for
retaining that employee. Hence the importance lies as highlighted by the paper in focusing on
efficient labor Input and maintaining an organizational culture that motivates employees towards
their work followed by raising the productivity as well as profitability.

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
According to Popli & Rizvi, (2016) the bottom line employees of any organization
exhibits direct interaction with cross potential clients and hence they needs superior training to
maintain and cultivate and effective employee customer relationship. This in the long run heads
the organization to with their consumers at a low cost way up able to reach superior results due
to effective engagement of their employees. The employees of the organization becomes
effective resource to promote of the organizational activities as well as its products and services.
The employee’s works optimize objective by minimizing both human cost as well as financial
cost by maintaining a better quality of relationship with their customers to exchange of word of
mouth in their workplace or through exchange of information in online platforms.
According to Erickson, (2015) the aspect of profitability can only be raised if the
managerial, operational as well as financial plans are implemented by the bottom line of
execution of this plans. A company should be cautious enough in order to retain is still
employees and ensure their effective grievance management this will not only fulfill individual
grievances of employees but also will make them feel that they are important to the organization
this will raise the willingness of the employees and will motivate them towards working. Photo
organization and hence the organizational objectives of maximizing its profitability will
automatically get raised.
According to Terera & Ngirande, (2014) the budgets that are being prepared by various
companies should become effectively accomplished if and only if employees a dedicated towards
optimizing their performance. The performance of the employees thus plays an important role in
ensuring the performance of the organization is optimized. Notably, every organization set focus
in announcing profitability how many lacks in understanding the employee needs and fulfilling
their requirements. This was the willingness of employees to work for the company and

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
demotivate them towards leaving the job. Organization should be much taking care of the
employee needs fulfilling the requisite necessities of them. In return the employees will become
motivated as well as will try their best to work for the company.
According to Ritesh & Mehrotra, (2017) depending upon the choice various companies to
restore profitability, the factors that affects it, varies. By emphasizing on this issue the paper
highlight the importance of employee retention and the labor input should be capitalized with
proper specification us job rules. This time the job rules and the commitment of the employees
and their willingness to work for that, the profitability of the company will face upheavals and
downfalls. Most importantly the paper reflected upon the fact that, it is important can help the
skill of the employees is necessary to facilitation of training programs which will ensure that the
expertise employees a maximum. Moreover, the employees will find that exist career growth
find opportunities to get motivated towards their employed activities for the organization. Thus
the organization will have to separately for dancing the motivation of the employees and ensure
employee retention rather the employees will wheeling the work of the company for maximizing
individual objectives of career prospects as well as for the organizational prospective to
maximize profitability.
Data Collection Methodology
The methodology that is being developed on the basis of the companies undertaken to
investigate mission of employee retention with the profitability of those companies. The annual
reports are being followed as well as value is given in accumulating information regarding the
net profit and turnover of employees (Beynon et al., 2015). Descriptive research design with
quantitative research approach and positivism is the fundamental methodology that are being

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
followed in order to collect information in the form of processed data and incorporate them to
reach significant results.
Data analysis
The process of data analysis is executed based on summarizing the operational status and
financial performance of the companies undertaken for the research. The collected data is of
2015-16 and hence they are further been analyzed based on statistical tools of measuring
significance among employee retention and profitability of the companies.
Table 1: List of 30 ASX companies
Number of
Companies
ASX Listed Companies Employee
turnover (%)
Net profit
1 Adelaide Brighton 21.3 11.4
2 AGL Energy Ltd 26 2.0
3 Aristocrat LeisureStrong Buy 31.4 -8.8
4 Als Ltd 23.6 6.8
5 Atlas Arteria Ordinary Stapled Securities 16.3 21.4
6 Amcor Ltd 16.9 20.2
7 AMP Ltd 21.5 11.0
8 Ansell Ltd 16.6 20.8
9 ANZ Banking Group Ltd 18.2 17.6
10 APA Group Units FP Stapled Securities 20.8 12.4
11 Ausnet Services Ltd 12.1 29.8
12 ASX Ltd 14.6 24.8

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
13 Alumina LtdStrong Buy 22.1 9.8
14 Aurizon Holdings Ltd 20.1 13.8
15 Bendigo and Adelaide 21.8 10.4
16 BHP Billiton Ltd 29.7 -5.4
17 Boral LtdStrong Buy 25.4 3.2
18 Bank of Queensland 13.7 26.6
19 Bluescope Steel Ltd 21.8 10.4
20 Brambles Ltd 14.1 25.8
21 Carsales.com Ltd 40.2 -26.4
22 Commonwealth Bank 38.9 -23.8
23 Coca-Cola Amatil 42.1 -30.2
24 Challenger Ltd 42.2 -30.4
25 Charter Hall Group Stapled Securities US
Prohibited
38.1 -22.2
26 Cimic Group Ltd 42.8 -31.6
27 Coles Group 40 -26.0
28 Computershare Ltd 43 -32.0
29 CSL Ltd 41.8 -29.6
30 Cochlear Ltd 42.2 -30.4

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
Adelaide Brighton
Aristocrat LeisureStrong Buy
Atlas Arteria Ordinary Stapled Securities
AMP Ltd
ANZ Banking Group Ltd
Ausnet Services Ltd
Alumina LtdStrong Buy
Bendigo and Adelaide
Boral LtdStrong Buy
Bluescope Steel Ltd
Carsales.com Ltd
Coca-Cola Amatil
Charter Hall Group Stapled Securities US Prohibited
Coles Group
CSL Ltd
0
5
10
15
20
25
30
35
40
45
50
Employee turnover (%) Net profit
Figure 1: Employee Turnover vs. Profitability (Source: Ansell.com, 2016)
It is been seen that the employee turnover has a pattern of change which has a trending
impact upon that of the net profit of the 30 ASX listed companies. This initiates the inquisition
related to examining the existing relationship between the employee turnover as well as that of
the net profit of the companies and how they are influences each other (Alsglobal.com, 2016).
The data also reveals that the proportion of change in the net profit is dependent on many factors
for the 30 ASX listed companies. However, employee turnover has also an impact that cannot be
overlooked.

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THE EFFECT OF EMPLOYEE TURNOVER IN PROFITABILITY OF COMPANY
Gantt chart
The Gantt chart can be incorporated as follows:
Figure 2: Gantt Chart