Labour productivity and Labour costs per unit

• What are labour productivity and labour costs per unit linked to?

  They measure employee efficiency
• What does labour productivity measure?

  Average output produced by an individual worker
• How are labour costs per unit defined?

  Average labour costs for one unit of output
• How is labour productivity calculated?

  Output per period divided by employees
• How is labour costs per unit calculated?

  Total labour costs divided by total output
• Why do businesses want to improve labour productivity?

  To enhance efficiency and reduce costs
• What should be investigated when productivity is low and costs are high?

  The causes of low productivity and high costs
• What are typical causes of low labour productivity and high labour costs per unit?

  • Internal factors causing high labour turnover
  • Inefficient work processes
  • Lack of employee skills or motivation
• What should be implemented after identifying causes of low productivity?

  Appropriate HRM policies for improvement
• What strategies can increase labour productivity and reduce costs?

  1. Recruitment of skilled employees
  2. Provision of training
  3. Appropriate remuneration
  4. Improved working practices
  5. Enhanced technology and equipment
  6. Positive working environment
• How can holding down wages reduce labour costs per unit?

  By negotiating wage cuts during recessions
• What is a consequence of replacing workers with machines?

  Labour costs per unit will fall
• What happens when production is outsourced?

  Business no longer needs its own employees
• What factors contribute to successful efforts in increasing productivity and reducing costs?

  1. Employee understanding of productivity needs
  2. Employee involvement in changes
  3. Job security for employees
  4. Extra rewards for employees
• Why might employees resist attempts to increase productivity?

  Fear of job loss and extra work demands
• What is likely to happen if productivity increases without job security?

  Redundancies may occur
• Why do negotiations about pay and productivity often occur simultaneously?

  Employees demand higher rewards for increased work