Role of compensation benefits in employee turnover in the presence /absence of employment opportunities

Abstract

Employee turnover was first studied in 20th century in a broad perspective to see how compensation package, labor market structure and unemployment rate influence employee turnover. Turnover is a broad term which is further divided into two categories, voluntary and involuntary turnover. Voluntary turnover is the decision made by the employee himself whereas involuntary turnover is the decision made by the organization. It includes firing the employee and dismiss from job. Too much voluntary turnover can have adverse effects on the organizations. Experts suggests that it is easier to recruit people. However, it is difficult to retain them. Employee turnover is a prevailing yet neglected issue in today’s world. Research has shown that effective performance of SME’s (small medium enterprises) depends upon the support from HRM’s activities as human resource management is responsible for planning, staffing, motivating and controlling everything regarding the human resource (Samad, 2006). Higher employee turnover rates and lower employee retention is one of the biggest challenge that SME’s face. This puts financial and non-financial strain on organizations. When an employee leaves, the organization has to bear additional costs including recruitment and training costs.