Purpose: To understand how and when different human resources practices will impact employee turnover, with a focus on the type of employee (e.g., full-time/part-time) and the state of the current labor market.
Summary: The exchange of benefits between employees and employers is the foundation of many human resources management practices. Employers desire to enhance employee performances through performance expectation human resources practices, such as pay-for-performance plans or performance feedback. In exchange, employers offer employees long-term investments, such as favorable benefits and pay, job security, and fair treatment through inducement human resources practices. To understand the influence of human resources practices on employee turnover, we surveyed workers in the Canadian Travel, Tourism and Hospitality industry.
External Labor Market Condition
We found that when employment opportunities were abundant in the labor market, investment in inducement human resources practices were associated with lower quit rates and the absence of investment increased quit rates. However, when employment opportunities were limited, the amount of employer investment in employees had little effect on employee quit rates. In sum, contingent on the condition of the labor market, employers’ willingness to invest in the long-term well-being of employees can influence the turnover rates of the organizations.
Type of Employment
Investment in inducement human resources practices was associated with lower quit rates among permanent, full-time and part-time employees. Temporary employees, on the other hand, were less likely to quit if employers offer more performance expectation human resources practices, particularly when the unemployment rates were high in the labor market. The influence of human resources practices on quit rates was explained by the differences in motivation between the employment groups: permanent employees were more concerned with the quality of their long-term exchange relationship with their employers, while temporary employees were motivated to maximize their benefits (e.g., bonuses) during their short tenure with the organization.
Practical Implication: Bundles of human resources practices need to be differentiated as they are crucial in influencing employee quitting behavior. Companies will especially benefit from promoting inducement human resources practices to lower quit rates when industry employment opportunities are ample or encourage employee commitments to the organization prior to changes in labor market conditions. Further, it is important to distinguish between and cater to permanent and temporary employees as they respond differently to varying human resources practices.
Summary of Schmidt, J. A., Willness, C. R., Jones, D. A., & Bourdage, J. S. (2018). Human resource management practices and voluntary turnover: a study of internal workforce and external labor market contingencies. The International Journal of Human Resource Management, 29(3), 571-594.
