Employee Demographic Factors Impact Turnover Rates in MSMEs

See discussions, stats, and author profiles for this publication at: https://www.researchgate.
net/publication/314232480
Employee Demographic Characteristics and Their Effects on Turnover and

Retention in MSMEs
Article · January 2014
CITATIONS READS
11 1,583
2 authors, including:
Collins Marfo Agyeman

All Nations University College
12 PUBLICATIONS 27 CITATIONS
SEE PROFILE
Some of the authors of this publication are also working on these related projects:
DEMONETISATION View project
All content following this page was uploaded by Collins Marfo Agyeman on 05 March 2017.
The user has requested enhancement of the downloaded file.

International Journal of Recent Advances in Organizational Behaviour and Decision Sciences (IJRAOB)
An Online International Monthly Journal (ISSN: 2311-3197)
2014 Vol: 1 Issue 1
Employee Demographic Characteristics and Their Effects on

Turnover and Retention in MSMEs
Collins Marfo Agyeman,
SRM University, Faculty of Management,
Kancheepuram District,
Chennai, Tamil Nadu, India.
Email: sircollins28@gmail.com
Prof. V.M. Ponniah Ph.D.,

SRM University, Faculty of Management,
Kancheepuram District,
Chennai, Tamil Nadu, India.
Email: ponniah.vm@ktr.srmuniv.ac.in
_____________________________________________________________________
Abstract
Employee retention is one of the challenging issues faced by corporate leaders in any industry
as the performance of any business unit depends on its employees. The ability to retain talented
and committed employees contributes significantly to the success of the business. As employees
are important, so is employee retention an important factor for all companies, especially the
small businesses. In Micro, Small and Medium Enterprises, the skills of employees are the key
human capital for efficient operations of the business. Therefore, the need for designing
effective retention strategies arises. If the talent of the employees is retained and rewarded, the
problem of turnover can be minimized. This study makes an attempt to analyze the various
employee demographic characteristics and their effects on turnover and retention in MSMEs.
The objectives of the study are to investigate the major factors that affect employee retention
in MSMEs, to examine the relationships between the demographic variables and retention of
employees and to identify the negative effects of voluntary turnover of key employees on
MSMEs. Descriptive research approach has been followed and data was collected from 120
MSMEs randomly selected from the cotton textile, agro, jute and leather based sectors in
Kancheepuram District through a structured questionnaire. To examine the hypotheses of the
study, regression and chi-square analyzes were employed for analyzing the study variables.
The findings reveal that retention factors are strongly associated to different demographic
characteristics. Further, voluntary turnover of key employees have a number of adverse
consequences for MSMEs, including, lowered productivity and profitability. It is therefore
concluded that increasing job satisfaction, providing good working environment and career
development opportunities, increasing recognition and rewards are some of the strategies that
can help minimize the turnover rate.
Keywords: MSMEs, Demographic Characteristics, Employee Retention, Employee Turnover.

JEL Classification: C 19, G13, G 14
12
www.globalbizresearch.org
2014 Vol: 1 Issue 1
1. Introduction
The Micro, Small and Medium Enterprise sector in India has consistently registered higher
growth rate as compared to other industrial sectors. This sector is noted for its employment
potential at low capital cost and the labour intensity is estimated to be higher than the larger
enterprises. However, the sector is faced with employee retention challenges, as they are always
competing for the best talent employees (Porter 2001).
Employee retention is an important factor for all companies, especially the small businesses
in the course of their operations, since attracting, training, retaining and motivating employees
are the critical success determinants for today’s organization. Essentially, more organizations
are now realizing that retention is a strategic issue and represents a competitive advantage
(Walker 2001).
Employee retention levels depend, in part on the people who are hired, why they are hired,
and how they are managed (Dibble, 1999, Herman, 1999; Kaye and Jordan-Evans, 1999). A
successful MSME also depends on its team of committed and productive employees working
with it.
The skill of an employee is therefore the key human capital to operate the business
efficiently and has to be retained for the development of the organization. Moreover, when
skilled employees leave a company, they can take a lot of know-how with them, and thus the
company is at risk of losing confidential information to competitors (Frank et al. 2004; Walker
2001). Easton and Goodale (2002) reveal that a host of direct and indirect costs arise from the
wake of each employee who voluntarily leaves an organization. The turnover of talented
employees constitutes the loss of a valued employee and costs such as recruitment, training and
general administration are incurred that subsequently hinder MSMEs growth and success. Also,
according to Dess and Shaw (2001), turnover results can have direct and indirect, tangible and
intangible costs and a loss of social capital, which may impact organizational success.
1.1 Meaning of MSMEs
The Micro, Small and Medium Enterprises Development (MSMED) Act which was
enacted in 2006 by Government of India defines MSMEs as follows:
Table 1: Classification of MSMEs
A) Manufacturing Enterprises- Investment in Plant and Machinery
DESCRIPTION INR
Micro Enterprises up to INR 25 lakhs
Small Enterprises above INR 25 lakhs and up to INR 5 crores
Medium Enterprises above INR 5 crores and up to INR 10 crores
B) Service Enterprises- Investment in Equipment

DESCRIPTION INR
13
2014 Vol: 1 Issue 1
Micro Enterprises up to INR 10 lakhs
Small Enterprises above INR 10 lakhs and up to INR 2 crores
Medium Enterprises above INR 2 crores and up to INR 5 crores
Source; Ministry of MSME
(A) Manufacturing Enterprises are those Enterprises engaged in the manufacture or production,
processing or preservation of goods as specified below:
1. A Micro Enterprise -- is an Enterprise where investment in plant and machinery does not
exceed Rs. 25 lakh;
2. A Small Enterprise -- is an Enterprise where the investment in plant and machinery is more
than Rs. 25 lakh but does not exceed Rs. 5 crore; and
3. A Medium Enterprise -- is an Enterprise where the investment in plant and machinery
is more than Rs.5 crore but does not exceed Rs.10 crore.
(B) Service Enterprises are those Enterprises engaged in providing or rendering of services and
whose investment in equipment as specified below;
1. A Micro Enterprise -- is an Enterprise where the investment in equipment does not exceed
Rs. 10 lakh;
2. A Small Enterprise -- is an Enterprise where the investment in equipment is more than Rs.10
lakh but does not exceed Rs. 2 crore; and
3. A Medium Enterprise -- is an Enterprise where the investment in equipment is more than Rs.
2 crore but does not exceed Rs. 5 crore.
MSMEs face difficulties in retaining employees for a number of reasons. The present study
builds on existing research on employee turnover and retention and therefore, makes an attempt
to analyze the various employee demographic characteristics and their effects on turnover and
retention in MSMEs. Given the phenomenal growth of the Indian MSME sector over the years,
it is important for the owners/managers to understand, predict and control employee turnover.
2. Literature Review
(A) Retention/Turnover Factors
Employee turnover as defined by Reggio (2003) refers to the movement of employees out
of an organization. Turnover of employees has both short and long-run negative effects for the
organization. This affects teamwork, raises costs, reduces productivity, and results in lost
knowledge. According to Holzer and Wissoker (2001), turnover appears to reflect significant
work place problems, rather than opportunities for advancement into better jobs. Management
should therefore recognize the need for employee retention practices.
Numerous studies have indicated that micro, small and medium enterprises have been a
pivotal instrument of economic growth and development in both developed and developing
economies. However, labour turnover has had a greater impact on the survival of these MSMEs.
A study by Booth and Hamer (2007) found that labour turnover is related to a variety of
14
2014 Vol: 1 Issue 1
environmental factors and organizational factors such as company culture and values,
supervisory style, fair pay, corporate value, giving support to each other, trust and respect
between employees, manageable workload, development and career building satisfaction and
degree of job satisfaction.
Employee turnover affects both workers and firms. Workers experience disruption, the need
to learn new job-specific skills and find different career prospects (Chow et al. (1999), Tran
and Perloff (2002), Roy (2002), Theodossiou (2002), Gautier et al. (2002), Taplin et al. (2003),
Clark (2004) and Leuven (2005)). Firms, on the other hand, lose job-specific skills, suffer
disruption in production and incur the costs of hiring and training new workers. Incoming
workers, however, may be better educated, more skilled and have greater initiative and
enthusiasm than those who leave. This has affected survival not only for small firms but large
one as well. Turnover is a symptom of ineffective retention management, therefore, the first
step for all MSMEs is to understand that effective human resource management must reach
beyond merely attracting quality staff and discover what motivates employees’ overtime. This
is important for any retention programme.
From the review of previous studies, it is found that human resource management play
pivotal role in employee’s retention. Human resource management practices in compensation
and rewards, job security, training and developments, supervisor support culture, work
environment and organization justice can help to reduce absenteeism, employee retention and
better quality work. Moreover, other studies suggest several factors which enhance and play
pivotal role in employee retention. Shore and Griffeth (2003) in their study explored that
turnover intentions represented a reliable indicator of actual turnover and were heavily
influenced by job satisfaction. Reggio (2003) also concluded from literature review that it is
important that organizations strive to keep employees satisfied. Other studies by Allen and
Griffeth (2001), Allen et al. (2003), and Chiu and Francesco (2003) have shown that job
satisfaction is a strong predictor of turnover intentions. Finally, Greenberg and Baron (2003)
concluded that naturally, as working people, we all want to be satisfied with our jobs.
According to Cappelli (2000), career opportunities, work environment, work life balance,
Organizational justice, and existing leave policy and organization image are the factors which
have direct impact on retention. In a study by Walker (2001), he identified seven factors that
can enhance employee retention, these are: (i) compensation and appreciation of the performed
work, (ii) provision of challenging work, (iii) chances to be promoted and to learn, (iv)
invitational atmosphere within the organization, (v) positive relations with colleagues, (vi) a
healthy balance between the professional and personal life, and (viii) good communications.
Some studies have indicated that a set of workplace norms and practices might be taken as
inviting employee engagement. Hytter (2007) found that the personal premises of loyalty, trust,
15
2014 Vol: 1 Issue 1
commitment, and identification and attachment with the organization have a direct influence
on employee retention. Workplace factors such as rewards, leadership style, career
opportunities, the training and development of skills, physical working conditions, and the
balance between professional and personal life have an indirect influence (Hytter 2007).
Based on these studies, six human resource management practices were selected as some
of the major factors that affect employee retention and turnover which are;
 Supervisor support
 Employee communication
 Compensation, recognition and rewards
 Work environment
 Career development opportunities
These practices are all important, when dealing with employee retention in MSMEs.
(B) Demographic Factors
The reviews of literature of demographic factor variables that have been found to have stable
relationship with retention and turnover intentions are age, gender, tenure, education and
income levels. These have influenced employee retention and turnover overtime. Demographic
factors have been chosen because they have an influence on employee retention strategies.
Several studies in which demographic factors have been employed to investigate job
satisfaction and job attitudes have shown that they are strong predictors of turnover intentions
(Furnham et al. 2009; Kavanaugh et al. 2006; Ng and Sorensen 2008; Schroder 2008).
The most studied and the most consistent in its relationship to turnover is the employee’s
age. This was revealed in a study by Ahuja et al (2007) on the IT industry in India. They found
that age had a modest but significant effect on turnover intention. There are different
perceptions of job satisfaction and motivation across the age spectrum. In their separate studies
on retention of healthcare professionals, they found younger nurses had lower levels of job
satisfaction while the older age group of 40 and above had higher levels of job satisfaction
(Griffeth et al. 2000; Kavanaugh et al. 2006; Wilson et al. 2008). A meta-analysis by Borman
and Dowling (2008) in their study on teacher attrition and retention, they indicated that those
who are 51 years of age or older are nearly 2.5 times more likely to quit teaching than teachers
who are 50 or younger.
With respect to years of service, Ng and Sorensen (2008) reported that employees with
higher tenure may have familiarity with their work role and have reached a higher level of
career attainment than those employees with lower tenure. On the other hand, a further study
conducted by Kavanaugh et al. (2006) revealed that nurses with different levels of tenure are
not motivated to remain with an organization by the same incentives. Moreover, in a study by
16
2014 Vol: 1 Issue 1
Crawley (2005) on the military, he reported that women with five to eight years of service are
most likely to leave.
A descriptive statistics reported by Luekens et al. (2004) suggests most clearly that retained
employees are more likely to be male than female. In a related study, Ingersoll (2001) found
males were slightly more likely than females to stay.
Aside age and gender, level of education or qualification is found to be positively associated
with turnover suggesting that the more educated employees are, the more likely they are to quit.
With marital status, Crawly (2005) in his study found that for single officers without
children, 58 percent of men and 53 percent of women said they intended to remain in uniform.
This concludes that married employees have higher intention to leave due to family
commitment than unmarried employees.
Higher income levels are significant for employees to be retained. A large number of studies
have examined the relationship between pay and retention and have found a consistent
association between larger teacher salaries and lower rates of attrition (Kelly, 2004; Stockard
and Lehman, 2004; Johnson and Birkeland, 2003; Ingersoll, 2001).
The demographic characteristics chosen for the study based on the literature review are;
 Gender
 Age
 Marital status
 Qualification
 Income
 Years of service
It could be seen that these have the most impact on retention and turnover of employees,
hence the need to be included for this study.
3. Methodology
As the aim of this descriptive study was threefold, therefore, a systematic and
organized methodology was obtained for the research study. The descriptive research
design and the simple random sampling method were used to collate data from a total
of 120 respondents selected from the cotton textile, agro, jute and leather based sectors
in Kancheepuram District. The primary data were collected through open‐ended and
closed questionnaire surveys. Regression analysis and chi-square test were also
employed for the analyses. In analyzing the relationship between the demographic
variables and the retention factors, the following hypotheses were constructed to
explore the relative impact of the independent variables on the dependent variable. The
research hypotheses are as follows;
17
2014 Vol: 1 Issue 1
H1: Gender of employees has a strong association with retention.

H2: Age of employees has a strong association with retention.
H3: Qualification of employees has a strong association with retention.
H4: Income of employees has a strong association with retention.
H5: Years of service of employees has a strong association with retention.
Regression analysis has been used to measure the impact of dependent variable on the
independent variables. The multiple regression model for the analysis used is as follows:
Y = α+β1X1+β2X2+β3X3+ β4X4+β5X5…….. (1)
Where, Y is retention (dependent variable)
α. is Y incepts
β1-5 are the regression coefficients
X1 is Gender
X2 is Age
X3 is Qualification
X4 is Income
X5 is Years of service
Y (retention) =β1Gender + β2Age, β3Qualification + β4Income + β5Years of service … (2)
The independent and dependent variables were further tested using Chi-square test with the
confidence level of 95% and the significance level of 5% respectively.
3.1 Research Questions
This study seeks to investigate the major factors that affect employee retention in MSMEs,
to examine the relationships between the demographic variables and retention of employees
and lastly, to identify the negative effects of voluntary turnover of key employees on MSMEs.
In this regard, the study addresses the following research questions;
1. What major factors most affect the decisions of employees to be retained in MSMEs?
2. What is the relationship between the employee demographic characteristics (gender, age,
marital status, qualification, income, and years of service) and employee retention?
3. What are the challenges faced by MSMEs as a result of employee turnover?
3.2 Modeling Volatility
In this study, the employee commitment model proposed by Veldman (2003) which
explains the relationship of various factors that affect the propensity of an employee to stay or
leave an organization is considered. This model is given in Figure 1 below:
Employer of
Choice
18
2014 Vol: 1 Issue 1
Organizational Employee Job Satisfaction

Climate Well-being
Organizational
Commitment
Propensity to
Stay/Leave
Figure 1 - Veldman’s employee commitment model
The model describes the various retention/turnover dimensions (Employer of Choice,

Organizational climate and culture, Job Satisfaction, and Employee Well-being) and their
impact on the individual’s decision to stay/leave the company. According to Veldman’s
employee commitment model, an individual employee in the first instance has certain aspect
regarding his/her organization as an Employer of Choice which influence his/her decision
whether to join and/or continue within the company. The propensity to stay or to leave is further
affected by Organizational climate and culture, Job Satisfaction, and Employee Well-being.
Organizational climate and culture reflects how the individual engages with the macro work
setting. Job Satisfaction indicates the micro (or immediate) work setting engagement of the
employee. Employee Wellbeing is found between Organizational climate and Job Satisfaction.
This positioning indicates the positive and/or negative responses of the employee to his/her
total work setting. The decision to stay or leave according to Veldman’s employee commitment
model is further determined by the individual's ability to pursue and find alternative
employment opportunity and the prevailing market situation facing the individual (such as a
favorable or unfavorable supply/demand for labor or the dominant economic climate).
Based on the Veldman’s employee commitment model, a basic retention/turnover
model is developed for this study. This a modification made to Veldman’s employee
commitment model. This gives a clearer and more lucid pictorial framework of both
the employee demographic characteristics and some of the major factors resulting in
employee retention and turnover. This model is shown in Figure 2:
Figure 2: A Basic Model of Employee Retention/Turnover
Supervisor Employee
Support Communication
Compensation Gender, Age, Marital Recognition and

Status, Qualification, Rewards 19
Income, Years of
service
2014 Vol: 1 Issue 1
Work Career
Environment Development
Job Satisfaction/ Opportunities
Dissatisfaction
Employee/Turnover
Retention in
Source: Developed for this study MSMEs
The above figure clearly illustrates the employee demographic characteristics as gender,
age, education, marital status and years of service along with some of the major factors that
affect employee retention and turnover which are supervisor support, employee
communication, compensation, recognition and rewards, work environment, career
development opportunities and finally resulting in either retention or turnover. Employee
retention and turnover are influenced by numerous contextual and demographic variables which
are features of the work context as well as the demographics of the job holder.
3.3 Data
MSMEs’ employees were the main respondents of this study because the aim was to
analyze the various employee demographic characteristics and their effects on retention in
MSMEs and how owners/managers could understand, predict and control employee turnover.
The data collected for the study centered on what retains and causes turnover of employees in
MSMEs. A total of 120 respondents were included in this study. Both primary and secondary
data were collected. The sample size of 120 was believed to be a fair representation of the
population because most of the previous related studies on MSMEs used a sample ranging from
60-500. For example, in a study by Sanda et al (2011) on ‘‘managerial competence and non-
performance of small firms in a developing economy’’, 72 questionnaires were administered
on MSME executives.
The primary data were collected through questionnaires. The questionnaire had three
sections; Section A sought background information of the respondents while section B explored
the challenges of employee retention. Section C entailed questions on employee retention
strategies. As the foundation of this research is based on the responses, the questionnaires were
distributed among the employees who were selected to participate in the study. Accordingly,
the small businesses selected for the sample employed less than 40 employees. Equal
importance was given to all four types of MSMEs in the collection of data by selecting 30
20
2014 Vol: 1 Issue 1
respondents from each as sample. In addition, the research used secondary data sources such as
publications, journals and books from management and human resources magazines and online
services. Descriptive and inferential statistical analyses were performed using SPSS version 17.
The data collection period was from September, 2013 to November 2013.
4. Results and Discussion
Descriptive Data Analysis
Table – 2: Characteristics of the Respondents (n = 120)
Demographic Factors Labels N %

1. Gender a. Male 66 55.0
b. Female 54 45.0
2. Age a. 18-25 years 15 12.5
b. 26-33 years 35 29.2
c. 34-41 years 30 25.0
d. 42-49 years 26 21.7
e. 50 years and above 14 11.7
3. Qualification a. Graduate 22 18.3
b. Post Graduate 16 13.3
c. Professional 44 36.7
d. Others 38 31.7
4. Income a. Below Rs. 10,000 19 15.8
b. Rs.10,000 - 19,000 20 16.7
c. Rs.20,000 - 29,000 36 30.0
d. Rs.30,000 - 39,000 19 15.8
e. Above Rs.40,000 26 21.7
5. Years of service a. Below 1 year 32 26.7
b. 1 – 4 years 41 34.2
c. 5 – 8 years 36 30.0
d. 8 years and above 11 9.2
Source: Field data
The table above shows the profile of the employees included in this study. The demographic
analysis shows that greater part of the respondents in this survey were males. 66 (55%) of 120
of the study respondents were males while the remaining 54 (45%) were females. The Age
profile of the respondents is unevenly distributed. The majority, being 35 (29.2%) respondents
out of the entire sample size of 120 fall within the age range of 26-33 years. The respondents’
qualification showed that 44 (36.7%) of them are Professionals, 38 (31.7%) had other forms of
educational training, 22 (18.3%) are graduates, and lastly, 16 (13.3%) are post graduates
holders. It is identified from the above table that majority of the employees, 36 (30%) earn
between Rs.20, 000 - 29, 000.
Finally, it was very necessary to ascertain the years of service within the employees’
categories. Majority of the employee respondents, 41 (34.2%) have been with their firms
between 1 – 4 years whilst 36 (30%) of them have spent 5 – 8 years working for their respective
firms. 32 (26.7) of the respondents have been with their firms for less than 1 year and only 11
(9.2%) have spent 8 years and above. This means most employees in MSMEs quit for other
21
2014 Vol: 1 Issue 1
opportunities outside their firms as the years pass by. It also signifies a higher rate of
employment by firms yearly to solve the turnover problem.
A) What major factors most affect the decisions of employees to be retained in MSMEs?
To know the major factors most affect the decisions of employees to be retained in MSMEs,
the study respondents were asked to provide those factors which according to their knowledge
would be helpful for retention. Their responses are shown in table 3 and figure 3 below:
Table 3: Major factors that affect employee retention in MSMEs
Frequency Percent
Valid Supervisor Support 11 9.2
Employee Communication 18 15.0

Compensation 21 17.5
Recognition and Rewards 24 20.0
Work Environment 23 19.2
Career Development Opportunities 23 19.2
Total 120 100.0
Figure 3:
Source: Field data

The above table and figure show 24 employees representing 20% reported that recognition
and rewards are the major factors which would lead to retention, followed by 23(19.2%)
indicating work environment and career development opportunities. 21 employees representing
17.5% also indicated that compensation is the major retention factor. Moreover, 18 out of the
total 120 employees representing 15% opted for employee communication. Lastly, 11(9.2%)
employees would be retained in their organization due to supervisor support.
The findings indicate that employees would be retained overtime if such factors are available
and practiced in their organizations. Therefore, managers of MSMEs can adopt these as
strategies to help minimize the turnover rates.
22
2014 Vol: 1 Issue 1
B) What is the relationship between the employee demographic characteristics and employee
retention?
Table 4: Model Summary of demographic characteristics on employee retention
Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
a
1 .978 .957 .955 .33939
a. Predictors: (Constant), Years of service, Qualification, Gender, Age, Income
ANOVAb
Model Sum of Squares df Mean Square F Sig.
1 Regres 290.194 5 58.039 503.875 .000a
sion
Residu 13.131 114 .115
al
Total 303.325 119
a. Predictors: (Constant), Years of service, Qualification, Gender, Age, Income
b. Dependent Variable: Major factors that affect employee retention in MSMEs
Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) -.120 .105 -1.142 .256
Gender .131 .115 .041 1.141 .256
Age .493 .081 .376 6.123 .000
Qualificati .181 .050 .122 3.590 .000
on
Income .391 .089 .331 4.399 .000
Years of .269 .098 .159 2.733 .007
service
a. Dependent Variable: Major factors that affect employee retention in MSMEs
The Regression coefficient ‘R’ = 0.978 or 97.8% which means that correlation between
dependent variable and independent variables is positive. The coefficient of determination ‘R2’
= 0.957 indicating that 95.7% of variation in dependent variable is explained by independent
variables. The F-test value of 503.875 is significant because the significance level is = .000
which is less than 0.05.
Hence, null hypotheses will be rejected and alternative hypotheses will be accepted that
retention is positively associated with gender, age, marital status, qualification, income, and
years of service of employees. This also implies that the correlation between dependent variable
and independent variables is statistical significant and the regression model is valid.
According to the table, the regression coefficients for;
23
2014 Vol: 1 Issue 1
 Gender of employees (β1) = .041 or 4.1% which implies that one percent increase in
gender of employees increase 4.1% of retention level if other variables are kept
controlled. The T-test value 1.141 and significant at .256 which is more than the 0.05.
The relationship is positive and statistically insignificant but the regression model is
valid.
 Age of employees (β2) = 0.376 or 37.6% which implies that one percent increase in
age of employees increase 37.6% of retention level if other variables are kept
controlled. The T-test value is 6.123 and significant at .000 level which is less than the
0.05. The relationship is significant and the regression model is valid.
 Qualification of employees (β3) = 0.122 or 12.2% which implies that one percent
increase in qualification of employees increase 12.2% of retention level if other
variables are kept controlled. The T-test value is 3.590 and significant at .000 level
which is less than the 0.05. The relationship is significant and the regression model is
valid.
 Income of employees (β4 ) = .331 or 33.1% which implies that one percent increase in
income of employees increase 33.1% of retention level if other variables are kept
controlled. The T-test value is 4.399 and significant at .000 level which is less than the
0.05. The relationship is significant and the regression model is valid.
 Years of service of employees (β5) = .159 or 15.9% which implies that one percent
increase in years of service of employees increase 15.9% of retention level if other
variables are kept controlled. The T-test value is 2.733 and significant at .007 level
which is less than the 0.05. The relationship is significant and the regression model is
valid.
Table 5: The results of Chi-square test
Hypotheses Chi- df Asymp. Results
Square Sig. (2-
Value sided)
H1: Gender of employees has a strong 98.451 5 .000 Supported
association with retention
H2: Age of employees has a strong association 333.996 20 .000 Supported
with retention
H3: Qualification of employees has a strong 209.356 15 .000 Supported
H4: Income of employees has a strong 340.276 20 .000 Supported
H5: Years of service of employees has a strong 255.093 15 .000 Supported
According to the above table, the results of Chi-square tests for all the hypotheses are in
significant level. Thus all null hypotheses are rejected and alternative hypotheses are accepted
24
2014 Vol: 1 Issue 1
at 5% significant level. The results depict an association between the various demographic
factors and retention, thus, they have positive relationships.
 H1: Gender of employees has a strong association with retention
Since chi-square value of 98.451 is greater than 0.05 significant level. The hypothesis is
therefore accepted.
 H2: Age of employees has a strong association with retention
Since chi-square value of 333.996 is greater than 0.05 significant. The hypothesis is therefore
accepted.
 H3: Qualification of employees has a strong association with retention
therefore accepted.
 H4: Income of employees has a strong association with retention
therefore accepted.
 H5: Years of service of employees has a strong association with retention
therefore accepted.
B) What are the challenges faced by MSMEs as a result of employee turnover?
The study respondents were asked to select some effects of employee turnover from the
evidence of literature and the following are their responses shown in table 6 and figure 4 below:
Table 6: Challenges faced by MSMEs due to employee retention
Frequency Percent
Valid Higher cost of production 18 15.0
Increased cost of recruitment and training 37 30.8

Demoralization of organizational members 21 17.5
Decreased production 18 15.0
Problem of cooperation and coordination between 11 9.2
old and new employees
Lower profitability 15 12.5
Total 120 100.0
Figure 4:
25
2014 Vol: 1 Issue 1
Source: Field data
From Table 4 and Figure 4 above, the challenges faced by MSMEs as a result of employee
turnover are depicted. It is observed that increased cost of recruitment and training is the most
challenging issue being faced by MSMEs. This recorded 30.83% of the responses, followed by
demoralization of organizational members scoring 17.5%. Both higher cost of production and
decreased production had equal responses with 15% each. Lower profitability recorded 12.5%
and lastly, the problem of cooperation and coordination between old and new employees had
the least responses of 9.17%.
Findings from the responses above reveal that turnover results in many different problems.
High employee turnover rate is financially costly to the business because time is needed to be
spent in employing and training new employees. It can be minimized through considering
different preventive measures by the management. These may include increasing job
satisfaction, providing good working environment and career development opportunities,
increasing recognition and rewards.
5. Conclusions and Recommendations
This study sought to identify the various employee demographic characteristics and their
effects on turnover and retention in MSMEs. Regression analysis and chi-square test revealed
a positive association between the dependent and the independent variables.
Thus, retention factors are strongly associated to different demographic characteristics of
gender, age, marital status, qualification, income, and years of service. Further, voluntary
turnover of key employees have a number of adverse consequences for MSMEs, including,
lowered productivity and profitability.
The review of the literature identified that Human Resource practices are the most
important and valuable means that influence employee retention in any organization. These are
considered as the key factors in managing Human Resource in MSMEs. MSMEs have a
significant contribution to the economic growth of a country and therefore needs better retention
strategies to increase retention rates of employees, improve their productivity and profitability
margins. It is therefore concluded that increasing job satisfaction, providing good working
environment and career development opportunities, increasing recognition and rewards and
improving communications are some of the strategies that can help minimize the turnover rate.
The study makes recommendations based on the findings of the employee retention survey.
The following are some of the recommendations for the management of MSMEs;
 This study suggests that retention could be enhanced with strategies or interventions.
MSMEs therefore, need to improve their Human Resource practices as it has the potential to
retain their employees’ overtime.
26
2014 Vol: 1 Issue 1
 Turnover rate should be continuously monitored and given much importance in

strategy formulation of MSMEs because turnover of talented employees constitutes the loss of
a valued employee and costs such as recruitment, training and general administration are
incurred that subsequently hinder MSMEs growth and success
 MSMEs should recognize the importance of employees because its success also
depends on its team of committed and productive employees working with it.
It is also recommended that further research should be conducted at different areas since this
study is limited to MSMES at Kancheepuram District in order to determine whether these
factors affecting retention of employees would also be applicable to those areas.
References
Ahuja, M., K., Chudoba, K., M., Kacmar, C., J., McKnight, D., H., and George, J. F. (2007).,
IT Road Warrior: Balancing Work-Family Conflict, Job Autonomy and Work Overload to
Mitigate Turnover Intentions.MIS Quarterly, 31(1), 1-17.
Allen, D., G., Shore L., M., and Griffeth R., W., (2003)., The Role of Perceived Organizational
Support and Supportive Human Resource Practices in the Turnover.
Allen, D., G., and Griffeth R., W., (2001)., Test of a Mediated Performance-Turnover
Relationship Highlighting the Moderating Roles of Visibility and Reward Contingency.
Journal of Applied Psychology, 86 (5), 1014-1021.
Armstrong, M., (2009)., Handbook of Human Resource Management Practice. London: Kogan
page.
Booth, S., and Hamer, K., (2007)., Labour Turnover in the Retail Industry: Predicting the Role
of Individual, Organizational and Environmental Factors Labour Turnover in the Retail
Industry. International Journal of Retail and Distribution Management, 35(4), 289-307.
Borman, G., D., and Dowling, N., M., (2008)., Teacher Attrition and Retention: A Meta-
Analytic and Narrative Review of the Research. Review of Educational Research, 78, 367-411.
Cappelli, P., (2000)., A Market-Driven Approach to Retaining Talent. Harvard Business
Review, 78(1), 103–112.
Chiu, R., K., and Francesco A., M., (2003)., Dispositional Traits and Turnover Intention:
Examining the Mediating Role of Job Satisfaction and Affective Commitment. International
Journal of Manpower, 24 (3), 284-299.
Chow, C.K.W., Fung, M.K.Y., Yue, N.H., (1999)., Job Turnover in China: A Case Study of
Shanghai's Manufacturing Enterprises. Industrial Relations, 38(4), 482-503.
Clark, K., (2004)., The Job Openings and Labor Turnover Survey: What Initial Data Show.
Monthly Labor Review, November, 14-23.
Crawley, V., (May 2, 2005). Juggling Family, Work Can Prompt Separation, Panel Says. Navy
Times.
Dess, G. D., and Shaw, J. D., (2001)., Voluntary Turnover, Social Capital, and Organizational
Performance. Academy of Management Review, 26(3), 446-456.
Dibble, S., (1999). Keeping your Valuable Employees—Retention Strategies for your
Organization’s Most Important Resource. New York: John Wiley and Sons Inc.
Easton, F.F and Goodale, J.C., (2002). Labor Scheduling with Employee Turnover and
Absenteeism. Center for Creation and Management. University Working Paper.
Frank, F. D., Finnegan, R. P., and Taylor, C. R., (2004). The Race for Talent: Retaining and
Engaging Workers in the 21st Century. Human Resource Planning, 27, 12–25.
27
2014 Vol: 1 Issue 1
Furnham, A., Eracleous, A., and Chamorro-Premuzic, T., (2009). Personality, Motivation and
Job Satisfaction: Herzberg meets the Big Five. Journal of Managerial Psychology, vol. 24, no.
8, pp. 765-79.
Gautier, P.A., Berg V.D., and Ridder, G., (2002). Worker Turnover at the Firm Level and
Crowding Out of Lower Educated Worker. European Economic Review, 46(3), 523-538.
Greenberg, J., and Baron, A., R., (2003). Behavior in Organizations. (8th Ed.). Pearson
Education, Inc., New Jersey.
Griffeth, R., W., Hom, P., W., and Gaertner, S., (2000). A Meta-Analysis of Antecedents and
Correlates of Employee Turnover: Update, Moderator Tests, and Research Implications for the
next Millennium. Journal of Management, 26(3), 463-488.
Herman, R. E., (1999). Keeping Good People—Strategies for Solving the #1 Problem Facing
Business Today. Winchester, VA: Oakhill Press.
Holzer, H., J., and Wissoker, D., (2001). How can we encourage Job Retention for Welfare
Recipients. The Urban Institute Series, No; A-49, (October). Available from
www.urban.org/UploadedPDF/310360_anf_a49.pdf.
Hytter, A., (2007). Retention Strategies in France and Sweden. The Irish Journal of
Management, 28(1), 59–79.
Ingersoll, R., M., (2001). Teacher Turnover and Teacher Shortages: An Organizational
Analysis. American Educational Research Journal, 38(3), 499-534.
Johnson, S., M., and Birkeland, S., E., (2003). Pursuing a Sense of Success: New Teachers
explain their Career Decisions. American Educational Research Journal, 40, 581–617.
Kavanaugh, J., Duffy, J., A., and Lilly, J., (2006). The Relationship between Job Satisfaction
and Demographic Variables for Healthcare Professionals. Management Research News, 29(6),
304-325.
Kay, B., and Jordan-Evans., (1999). Love ‘em or Lose ‘em—Getting Good People to Stay. San
Francisco: Berrett-Koehler Publishers, Inc.
Kelly, S., (2004). An Event History Analysis of Teacher Attrition: Salary, Teacher Tracking,
and Socially Disadvantaged Schools. Journal of Experimental Education, 72(3), 195–220.
Leuven, E., (2005). The Economics of Private Sector Training: A Survey of the Literature.
Journal of Economic Surveys, 19 (1), 91-111.
Luekens, M., T., Lyter, D., M., Fox, E., E., and Chandler, K., (2004). Teacher Attrition and
Mobility: Results from the Teacher Follow-Up Survey, 2000-01. Washington, D.C.: National
Center for Education Statistics.
Lucas, G., H., Jr., Parasuraman, A., Davis, R., A., and Enis, B., M., (1987). An Empirical Study
of Sales Force Turnover. Journal of Marketing, 51(3), 34-59.
Micro, Small and Medium Enterprises: What is the definition of MSME? downloaded from
http://www.rbi.org.in/scripts/FAQView.aspx?Id=84 on 19.10.2013.
Ministry of MSME: Brief Industrial Profile of Kancheepuram District 2012-13. Compiled by
MSME-Development Institute, downloaded from
http://dcmsme.gov.in/dips/IPS%20Kancheepuram%202012_t.pdf on 19.10.2013.
Nagadevara, V., Srinivasan, V., and Valk, R., (2008). Establishing a Link between Employee
Turnover and Withdrawal Behaviours: Application of Data Mining Techniques. Research and
Practice in Human Resource Management, 16(2), 81-99.
Ng, T., W., H., and Sorensen, K., L., 2(008). Toward a Further Understanding of the
Relationships between Perceptions of Support and Work Attitudes - A Meta-Analysis. Group
and Organization Management, 33(3), 243-268.
28
2014 Vol: 1 Issue 1
Porter, M.V., (2001). The Bottom Line in Employee Compensation. Journal of Association
Management, April, v53, i4, 44-50.
Reggio, E., A., (2003). Introduction to Industrial/Organizational Psychology (4th Ed.). Prentice
Hall, New Jersey.
Roy, S.D., (2002). Job Security Regulations and Worker Turnover: A Study of the Indian
Manufacturing Sector. Indian Economic Review, XXXVII (2), 141-162.
Sanda M.A., Sackey J., and Fältholm Y., (2011)., Managerial Competence and Non-
Performance of Small Firms in a Developing Economy. International Journal of Contemporary
Business Studies, 2(3), 6-24.
Schroder, R., (2008). Job Satisfaction of Employees at a Christian University. Journal of
Research on Christian Education, 17, 225-246.
Stockard, J., and Lehman, M., (2004). Influences on the Satisfaction and Retention of 1st-year
Teachers: The importance of Effective School Management. Educational Administration
Quarterly, 40(5), 742–771.
Taplin, I.M., Winterton, J., and Winterton, R., (2003). Understanding Labour Turnover in a
Labour Intensive Industry: Evidence from the British Clothing Industry. Journal of
Management Studies, 40(4), 1021-46.
Theodossiou, I., (2002). Factors Affecting the Job-to-Joblessness Turnover and Gender.
Labour, 16(4), 729-746.
Tran, L.H., and Perloff, J.M., (2002). Turnover in US Agricultural Labor Markets. American
Journal of Agricultural Economics, 84(2), 427-437.
Veldsman, T.H., (2003). Personal Communication. Internal Research Report CS Holdings.
Walker, J. W., (2001). Zero defections? Human Resource Planning, 24(1), 6–8.
Wilson, B., Squires, M., Widger, K., Cranley, L., and Tourangeau, A., (2008)., Job Satisfaction
among a Multigenerational Nursing Workforce. Journal of Nursing Management, 16(6), 716-
723.
29
View publication stats

Employee Demographic Factors Impact Turnover Rates in MSMEs

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Employee Demographic Factors Impact Turnover Rates in MSMEs

Uploaded by

Copyright:

Available Formats

See discussions, stats, and author profiles for this publication at: https://www.researchgate.

Employee Demographic Characteristics and Their Effects on Turnover and

Article · January 2014

Collins Marfo Agyeman

DEMONETISATION View project

The user has requested enhancement of the downloaded file.

Employee Demographic Characteristics and Their Effects on

Prof. V.M. Ponniah Ph.D.,

Keywords: MSMEs, Demographic Characteristics, Employee Retention, Employee Turnover.

B) Service Enterprises- Investment in Equipment

H1: Gender of employees has a strong association with retention.

Organizational Employee Job Satisfaction

The model describes the various retention/turnover dimensions (Employer of Choice,

Compensation Gender, Age, Marital Recognition and

Table – 2: Characteristics of the Respondents (n = 120)

Demographic Factors Labels N %

Employee Communication 18 15.0

Source: Field data

Increased cost of recruitment and training 37 30.8

 Turnover rate should be continuously monitored and given much importance in

View publication stats

You might also like