Labour Productivity

Labour productivity is a measure of the units produced by an employee in a given period of time. HR managers use this as a measure of an employee’s performance during appraisal reviews to inform decisions about employee pay and any possible training requirements.

Calculating labour productivity

Labour productivity is expressed as a number of units. It is calculated using the following formula:
- Labour productivity = Total output ÷ Total number of employees

Example of calculating labour productivity

If a business has 1,000 employees, and during a one month period, produces 250,000 bottles of orange juice, the labour productivity can be calculated by dividing 250,000 units by 1,000 employees to give 250 units per employee.
A Human Resources manager could compare a labour productivity calculation with previous years to assess how productive the current workforce is. HR managers may reward employees if productivity is increasing, though may plan training for employees if productivity is decreasing.

Employee Costs as a Percentage of Turnover

For many businesses, employees are the biggest cost of the business. In all businesses, and especially in labour-intensive businesses, HR managers must understand how the level of spending on employees compares to the overall size of the business.

Calculating employee costs

Calculating employee costs as a percentage of turnover allows HR managers to assess, as a proportion of total revenue, or turnover, the amount that is spent on staffing costs.
Employee costs as a percentage of turnover are expressed as a percentage and are calculated using the following formula:
- Employee costs as a percentage of turnover = (Total employee costs ÷ Total revenue) × 100

Example of calculating employee costs

If a newsagent had staffing costs of £105,000 in 2017, and had total revenue of £1,100,000, employee costs as a percentage of turnover could be calculated by dividing £105,000 by £1,100,000, to get 0.095, multiplied by 100 gives 9.55%. This means that the business spends 9.55% of its total revenue on employee costs.

Employee costs as a percentage of turnover

A Human Resources manager could compare their employee costs as a percentage of turnover with data from previous years, with data from competitors, if it is available, or with data from the industry.
If employee costs as a percentage of turnover are higher than they have been in previous years, a Human Resources manager may decide to try and reduce their total employee costs.

Lower employee costs as a percentage of turnover

Some businesses, for example, Aldi, have much lower employee costs as a percentage of turnover, because they place emphasis on cutting costs by operating minimum numbers of checkouts and limited numbers of shop floor staff, compared with supermarkets such as Sainsbury’s and Marks and Spencer.

1Business Organisation & Environment

1.1Introduction to Business Management

1.1.1Why Businesses Exist & Sectors

1.2Types of Organisation

1.2.1Sole Traders

1.2.2Limited Liability

1.2.3Non-Profit

1.2.4Franchising

1.2.5End of Topic Test - Franchising

1.3Organisational Objectives

1.3.1External Environments

1.3.2Business Mission & Corporate Objective

1.3.3Mission, Corporate Objectives & Strategy

1.3.4SWOT Analysis

1.3.5End of Topic Test - SWOT Analysis

1.4Stakeholders

1.4.1Stakeholders

1.5External Environment

1.5.1Social & Technological Environment

1.5.2Lifestyle & Technological Environment

1.5.3Corporate Social Responsibility

1.5.4Economic Environment

1.5.5Political & Legal Change

1.6Growth & Evolution

1.6.1Growth & Retrenchment

1.6.2Challenges of Growth

1.6.3Growth Models

1.6.4End of Topic Test - Diseconomies of Scale

1.6.5Internationalisation

1.6.6Sourcing Resources & Entering Markets

1.6.7End of Topic Test - Internationalisation

1.6.8Managing Internationalisation

1.6.9Impact of Internationalisation

1.7HL Only: Organisational Planning Tools

1.7.1Organisational Planning Tools

2Human Resource Management

2.1Functions & Evolution of Human Resource Management

2.1.1Setting Human Resource Objectives

2.1.2Human Resource Management

2.1.3Labour Turnover & Retention

2.1.4Labour Productivity

2.2Organisational Structure

2.2.1Organisational Structures

2.3Leadership & Management

2.3.1Managers

2.3.2Management Theories

2.3.3End of Topic Test - Management

2.4Motivation

2.4.1Motivating & Engaging Employees

2.4.2Taylor's Theory

2.4.3Maslow's Theory

2.4.4Herzberg's Theory

2.4.5Different Incentives

2.4.6Evaluating Incentives

2.5Organisational (Corporate) Culture

2.5.1Managing Organisational Culture

2.5.2Organisational Structures

2.6HL Only: Industrial/Employee Relations

2.6.1Improving Employer-Employee Relations

2.6.2Case Study - The Winter of Discontent

3Finance & Accounts

3.1Sources of Finance

3.1.1Internal Sources of Finance

3.1.2External Sources of Finance

3.1.3Factors for Financing

3.1.4End of Topic Test - Debt

3.2Costs & Revenues

3.2.1Costs & Revenues

3.3Break-Even Analysis

3.3.1Profit

3.3.2Break-Even Analysis

3.4Profitability & Liquidity Ratio Analysis

3.4.1Profitability Analysis

3.5Cash Flow

3.5.1Cash Flow

3.5.2Solutions to Cash Flow Problems

3.5.3Improving Cash Flow & Profits

3.6HL Only: Investment Appraisal

3.6.1Investment Appraisal

3.7HL Only: Budgets

3.7.1Cash-Flow & Budgets

4Marketing

4.1The Role of Marketing

4.1.1Setting Marketing Objectives

4.1.2Market Calculations

4.2Marketing Planning

4.2.1Marketing Mix

4.2.2Segmentation

4.2.3Niche & Mass Markets

4.3Market Research

4.3.1Market Research

4.3.2Market Mapping

4.3.3Methods of Market Research

4.4The 4 Ps

4.4.1Product Decisions

4.4.2Pricing Decisions & Price Skimming

4.4.3Pricing Decisions & Price Penetration

4.4.4End of Topic Test - Pricing & Competition

4.4.5Promotional Decisions

4.4.6Promotional Decisions 2

4.4.7Promotional Decisions 3

4.4.8Digital Marketing

4.4.9Evaluating Digital Marketing

4.4.10Case Study - The Marketing Mix & Promotion

4.4.11Place & Distribution

4.5HL Only: The Extended Marketing Mix

4.5.1The Extended Marketing Mix

4.6HL Only: International Marketing

4.6.1International Marketing

4.7E-Commerce

4.7.1E-Commerce

5Operations Management

5.1The Role of Operations Management

5.1.1Setting Operational Objectives

5.2Production Methods

5.2.1Production Processes Overview

5.2.2Production Processes

5.2.3Production Efficiency

5.2.4Technology & Production

5.3HL Only: Lean Prodution & Quality Management

5.3.1Importance of Quality

5.3.2Measuring & Identifying Quality

5.3.3Total Quality Management

5.3.4Evaluating Total Quality Management

5.3.5Case Study - Toyota Production System

5.4HL Only: Production Planning

5.4.1Capacity

5.4.2Productivity & Efficiency

5.4.3Technology & Efficiency

5.4.4Improving the Supply Chain

5.4.5Inventory

5.4.6Outsourcing

5.5HL Only: Research & Development

5.5.1Organisational Planning Tools

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