Labour productivity is a measure of the OUTPUT PER WORKER in a given TIME PERIOD.
Example 1:
If a factory has 76 employees and its output is 41,192 units per year, what is its labour productivity?
Answer: 41,192
76 = 542 units per employee
Labour Turnover
Labour turnover is the proportion of employees leaving a business over a period of time - usually a year.
Example 2:
How to calculate the average number employed:
The average number of employees can be calculated by adding the number of people at the start of the year to the number of people employed at the end of the year and divide the total by 2.
Leavers
All leavers are people who leave voluntary and non-voluntary. Non-voluntary leavers would include people who had been made redundant, were sacked or died. Voluntary leavers are people who chose to leave.
Internal Causes of Labour Turnover:
- Poor management
- Poor communication
- Poor selection procedures
- Low remuneration rates (pay)
- Monotonous jobs
- Poor working conditions
- Low motivation and morale
External Causes of Labour Turnover:
- New competition
- Higher wages elsewhere
- Better training elsewhere
- More local jobs
- More interesting jobs
Issues with high labour turnover:
- Increasing recruitment and selection costs (To replace staff who leave - advertising positions, conducting interviews)
- Increasing induction and training costs (So staff learn the skills needed, staff become familiar with the practices of the business)
- Costs of redesigning jobs in reaction to these rates (Making the job simpler so it is easier to replace staff)
- Reduced productivity rates (Due to skilled staff leaving and new, usually untrained staff joining the business)
- Decrease in morale among existing workers (Unsettling as there is a constant change of work colleagues)
How to improve labour turnover:
- Monitoring (Create a monitoring system that includes: Knowing how labour turnover in the company compares with the industry average, tracking trends in employee turnover over time or identifying area/departments where labour turnover is particularly high)
- Exit Interviews (Can identify problem areas in the organisation and common reasons why workers are leaving. Could discuss pay, training, career prospects or the job itself)
- Recruitment and selection (Money spent here could be regained by low labour turnover)
- Induction and training (Making the employee feel welcome in the firm)
- Reducing turnover of long-term workers (These workers have a huge amount of FIRM-SPECIFIC HUMAN CAPITAL - this is skills and knowledge directly relevant to the firm. To retain these long-term workers they could provide career progression or examine their remuneration)
But don't forget that labour turnover can allow:
- New ideas, skills, talents and enthusiasm to the labour force
- Can help a firm avoid complacency
- Prevent an over-reliance on tried and tested ways of working, making it inflexible in response to changes in its environment
- A business can reduce its workforce slowly without having to resort to redundancies - this is called NATURAL WASTAGE.
Absenteeism
Absenteeism is the proportion of employees not at work on a given day.
If 33 out of a workforce of 320 are absent on a given day, what is the absenteeism rate?
Answer: 33
320 x 100 = 10.3%
To find the rate of absenteeism for a year:
Example 4:
If the total number of days that could be worked is 250 (5 days x 50 weeks), the total number of employees is 80 and the number of days lost due to absence is 600, what is the annual rate of absenteeism?
Answer: 600
80 x 250 x 100 = 3%
Causes of Absenteeism:
- Illness (Unavoidable)
- Transportation issues
- Stress
- Industrial Action (e.g. a strike)
- Avoidance of work
Problems of absenteeism:
- Absence means work has to be covered --> Extra cost of agency workers, overtime rates or extra stress put on present employees
- If new and less skilled staff have to be deployed --> Productivity decreases --> Or Quality sacrificed --> Causes dissatisfied customers --> Adversely affect the profitability of the firm.
- If work cannot be covered, deadlines may be missed.
Strategies to reduce absenteeism:
Health and Safety
Refers to the well being of staff in the workplace.
Includes factors such as:
1. Prevention of accidents with machinery
- Adequate training
- Relevant health and safety procedures adhered to.
2. Prevention of injury (e.g. repetitive strain injury)
- Design of the workplace
- Breaks
- Nature of jobs given
- Most accidents and injuries can be prevented with proper training.
- Health and safety incidents may lead to employee absence and even compensation pay-outs from the business!
Example 5:
If over a period of a year there are 250 actual working days and the number of days lost for health and safety reasons is 5, what is the rate of absenteeism due to health and safety?
Answer: 5
250 x 100 = 2%
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