workforce-planning

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The reasons for and role of a workforce plan

Workforce planning focuses on identifying how many and what kind of employees are needed in a business
- It looks at how employees will be
  - Recruited and deployed
  - Developed and trained
  - Motivated, managed and effectively led

Reasons for workforce planning

Workforce planning helps make sure the business has the right number of people in the right jobs at the right time

Reason	Explanation
Fill skill gaps	If a business knows it will need people with digital or technical skills, workforce planning ensures they are trained or hired in time
Handle retirements or resignations	By predicting when people might leave, HRM can recruit or promote others without causing disruption
Meet changes in demand	If a business expects growth, such as launching in new countries, it plans for more staff If demand drops, it plans to reduce the workforce
Control labour costs	Avoids overstaffing, which is expensive, or understaffing, which reduces productivity and service quality
Support strategic goals	If a business wants to increase its customer service quality, it may need to hire more experienced employees or provide extra training
Adapt to technological changes	New machines or systems may require different skills, so new staff or training might be needed

Labour turnover informs workforce planning

Labour turnover measures the proportion of employees leaving a business during a specific time period
Calculating labour turnover rate helps HRM better understand workforce needs
It is expressed as a percentage and is calculated using the formula

$Labour space turnover space equals space fraction numerator Number space of space staff space leaving over denominator Total space number space of space staff end fraction space cross times space 100$

Factors that affect labour turnover

A rising rate of labour turnover can signal internal human resource management problems such as
- Poor management leading to workers losing commitment
- A poor recruitment and selection approach leading to staff leaving soon after starting their job
- Low wage levels compared to those that could be earned elsewhere
External factors can also increase labour turnover in a business
- A buoyant local economy where workers are attracted to employment opportunities elsewhere
- Improved transport links that provide an opportunity for workers to seek work across a wider geographical area

Implications of high and low labour turnover

High labour turnover

High labour turnover means that a business regularly loses a large number of employees who need to be replaced
- This incurs recruitment and training costs, disruption to operations and loss of skills
- However, a moderate labour turnover rate can bring new ideas and energy into the business
Fast-food chains like McDonald’s or KFC often experience high labour turnover, especially among part-time or entry-level workers
- These jobs often involve long hours, repetitive tasks and relatively low pay
- Many workers are students or temporary workers who leave after a short time
- There may be limited long-term career opportunities, especially at the lowest levels

Implications of high labour turnover

Problems	Opportunities
Increased recruitment and selection costs (e.g. advertising, interviews) Higher induction and training costs for new staff Lower productivity while new employees settle in Disruption to teamwork and relationships Loss of experienced employees and valuable knowledge Possible drop in morale for remaining staff	New employees may bring fresh ideas and innovation External recruits can introduce different skills and perspectives Opportunity to hire staff with better qualifications or attitudes Removes underperforming or demotivated staff Opens up internal promotion opportunities for existing staff Can help reshape company culture or restructure teams more easily

Case Study

Fresh Bites is a fast-growing chain of cafés based in urban areas across several countries. The company focuses on offering healthy snacks and drinks with fast service

Over the past 12 months, Fresh Bites has experienced high labour turnover, especially among its frontline staff, such as baristas and servers. Many employees leave within 6 months, often moving to other hospitality businesses or retail jobs

Despite offering flexible shifts, employee feedback shows that staff feel overworked and underappreciated. Some managers have also left for better-paid roles in competitors like international coffee chains

Problems

Increased costs: Fresh Bites has spent more on recruitment adverts, interviews and induction programmes, increasing its HR budget
Low productivity: New staff often take weeks to become fully efficient, which affects speed of service and increases customer waiting times
Customer dissatisfaction: Regular customers notice the constant change of staff and feel less connected to the brand
Team disruption: Frequent resignations have made it difficult for teams to build strong working relationships
Loss of experience: Skilled supervisors who knew how to deal with difficult customers or train others have left, creating knowledge gaps

Opportunities

Fresh talent: Some of the new hires have brought creative ideas for improving the menu and customer experience.
Performance shake-up: HR has started to review the training and reward systems to make the company more attractive and reduce poor performers.
Cultural reset: With many new staff joining, FreshBites is working on creating a more positive and inclusive workplace culture.

Low labour turnover

Low labour turnover means that most employees stay with the business and few people leave each year
- It’s usually a sign of a stable and satisfied workforce
- It can reduce costs and improve productivity, but it may also limit new ideas or make the business slow to adapt to change
In many European countries, public hospitals have low labour turnover among senior doctors and nurses
- Jobs often come with secure contracts, pensions and career development opportunities
- Many healthcare workers feel a strong sense of purpose and loyalty to their patients and team
- Leaving can mean losing benefits or having to retrain for work in another system or country
This stability means hospitals benefit from experienced staff, strong teamwork, and lower recruitment costs
However, it can also create challenges, including
- New practices and technologies may take longer to adopt
- Younger staff may feel blocked from promotions

Implications of low labour turnover

Problems	Opportunities
Fewer new ideas or innovations entering the business Risk of a stagnant workforce or one that is resistant to change Limited internal promotion opportunities may reduce motivation Long-serving staff may expect higher pay or more benefits Skill gaps may develop if no new expertise is introduced	Lower recruitment and training costs over time Experienced staff know the business well and work efficiently Strong relationships among long-term staff improve teamwork Greater loyalty, job satisfaction and commitment from employees Better customer service due to familiar and consistent staff

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