2. Labour productivity is a measure of the output
per worker in a given time period
Labour productivity =
Output per period/ number of employees per
period
Labour productivity
3. If output in a given month is 20,000 units and 40
people are employed during that month to
produce the goods, what is labour productivity?
LP= output per period/ no. of employees per
period
LP= 20000/40
LP= 500 units per worker
Example 1
4. LP may be increased by appropriate human
resource management (HRM) policies, e.g.
• Recruitment and selection of suitable employees
• Provision of training to enhance skills of existing employees
• Appropriate remuneration and non-financial benefits to improve
motivation
Other factors that may increase productivity;
• Improved working practices
• Improved technology and equipment
How to increase labour productivity
5. • Output will be increased using the same
number of employees
• Implies a lower labour cost per unit (if wages
stay the same)
• May result in lower priced goods/ higher profit
margins
An increase in Labour productivity
6. From example 1, if improved machinery is
introduced that cause output to increase to 30,000
units using the same number of employees, what is
the new labour productivity figure?
LP= output per period/ no. of employees per period
LP= 30,000/40
LP= 750 units per worker
Example 2
7. In example 1, if labour costs are £1000 per worker
per month, total labour costs are £40,000
(£1000x40). What is the original labour cost per
unit?
£40000/20000units= £2
In example 2, if labour productivity increases to
30000 units, what is the new labour cost per unit?
£40000/30000units= £1.33
Example 3
8. Labour turnover is the proportion of
employees leaving a business over a period
of time (usually one year)
Rate of labour turnover=
x 100
Labour turnover
no. leaving over a given period/average no. employed over a given period
9. If the average number of staff employed in a
firm last year was 250 and the number of
employees who left the firm last year was
10, what is the labour turnover?
Rate of labour turnover=
x 100
LT= (10/250)x100
LT= 4%
Example
no. leaving over a given period/average no. employed over a given period
10. LT indicates how content the workforce is in a firm. If the LT is
increasing this could be a sign of dissatisfied employees. Can
you think of reasons why this might occur?
Causes of a high labour turnover
Internal External
Ineffective leadership/ bad management
Poor communication
Low wages/salary
Poor selection procedures
Unchallenging jobs
Poor working conditions
Low motivation/morale
More attractive jobs elsewhere- higher
paid, better training and working
conditions, more interesting, closer to
home
11. • High recruitment and selection costs
• High induction and training costs
• Redesigning the job
• Reduced productivity
• Low morale among existing employees
Problems of a high LT
12. • Monitoring and benchmarking
• Exit interviews
• Recruitment and selection
• Induction and training
How to improve Labour Turnover
Can you think of ways in which businesses can
improve labour turnover?
13. Absenteeism is the proportion of employees not
at work on a given day
Rate of absenteeism=
no. of staff absent on 1 day/
total no. of staff
x100
Absenteeism
14. If 21 people out of a workforce of 300 are absent on
a given day, what is the rate of absenteeism?
Rate of absenteeism= no. of staff absent on 1 day/
total no. of staff
x100
RA= (21/300)x100
RA= 7%
Example 1
15. total no. of days lost due to absence in the year/
(total no. of days that could have been worked
x no. of employees)
X 100
Annual rate of absenteeism
16. If the total no. of days that could be worked is
250, the total no. of employees is 80 and the
number of days lost due to absence is 600, what
is the absenteeism rate for the year?
ARA= (600/ (250x80)) x100
ARA= 3%
Example 2
18. Can you think of ways businesses can reduce
absenteeism?
Strategies to reduce absenteeism
Flexible working practices
Making jobs interesting
Improving working conditions
Improving employee/employer relations
Introducing attendance bonuses
19. Rate of absenteeism due to health and safety=
No. of working days lost per year due to health
and safety/
Total no. of possible working days
X 100
Health and Safety
20. 1. Outline 2 ways in which a firm might increase its
labour productivity (4)
2. In a firm output in a particular month is 60,000
unit, 75 workers are employed and labour costs
are £1000 per worker per month. Calculate
labour productivity and labour cost per unit (6)
3. Explain two causes and two consequences of a
high rate of absenteeism for a firm (10)
Questions
