Labour productivity measures how much output each employee produces. Businesses need to know this because changes in labour productivity can have a massive impact on the business. This is especially true in labour intensive firms.
Labour productivity equals output per period divided by number of employees. The higher the better the workforce is performing. As labour productivity increases, labour costs per unit fall.
To increase labour productivity, businesses can motivate there staff more, or train workers to be more productive.
Business need to be careful with changing labour productivity because:
Quality can fall, especially if using Frederick Taylors piece-rate system.
Unless sales increases, job redundancies will be made. Planning ahead will help not to upset staff.
Absenteeism measures the amount of time employees are off work.
Absenteeism equals number of staff days lost divided by number of working days times 100. The lower the percentage, the better. The context of the business should be taken into account e.g. police vs sales people.
Absenteeism causes increased costs, which results into lost opportunities e.g. sales enquires not answered. Causes can be poor working conditions, poor relationships, stress and poor motivation.
Firms can try reduce absenteeism by using job enrichment and improving working relationships and conditions.
This measures the amount of staff who leave each year.
Labour turnover equals number of staff leaving divided by average number of staff employed.
People can leave for a number of reasons e.g.
Getting a new job
lack of Motivation
Poor recruitment process
Increasing delegation, job enrichment, higher wages and better training can reduce labour turnover. However sometimes labour turnover is a good thing. e.g. new ideas and enthusiasm from new employees, if sales fall you can reduce workforce by natural wastage and you can poach staff from competitors.
There are also disadvantages however such as lack of loyal and experienced staff, training costs money and productivity temp goes down, firm loses trained staff which they have paid for.