Human Resources

Managers can use a number of calculations to interpret and analyse the performance of human
resources within their business. Understanding human resources performance can help managers
make decisions on job design, employee numbers, rewards and remuneration, and human resource
policies.

Labour Productivity
Labour productivity is a key measure of employee performance. It interprets the output per worker
over a given time period. It directly affects profit margins and decisions around pricing.

It is calculated using the formular

Total output per time period / Number of employees at work

Interpreting Labour Productivity

Generally speaking the higher the labour productivity the better the business is performing.

However:

✓ It does not take into account wage rates – a key factors in employee performance.
✓ It does not take into account technology used in the production process.
✓ It may be affected by many other factors – such as internal disruptions to production, or the
nature of the task or product being produced, which will also influence this calculation.

Labour turnover and Labour Retention

This is an important measure as the number of employees leaving a company can give an insight into
a number of issues relating to happiness, motivation and the impact of this on overall labour costs.

Labour turnover is calculation by:

Number of staff leaving in a year / Average number of staff

Labour retention substitutes the average number leaving with the average number employed for
one year ( the year being measured ).

Interpreting labour turnover and retention

✓ With labour turnover come increased costs of recruitment and training.
✓ A higher turnover or low retention figure could indicate that employees are not happy with
their jobs.
✓ This might be used as a key performance indicator as businesses try to retain the most
talented workers within their company – having the best employees can be a competitive
advantage.
✓ Some industries will expect high rates of labour turnover – for example holiday companies,
due to contracts being seasonal.
✓ High rates of labour turnover may be encouraged as a business goes through a period of
change.
 Absenteeism
This compares the number of people absent for a time period by the total number of employees.

It is calculated using the formula:

Number of staff absent for time period / Total employees

Interpreting absenteeism
✓ A high level of absenteeism increases business costs as productivity falls and costs to cover
employees rise.
✓ High levels of absenteeism may also be an indicator of demotivation or tension in the
workforce.
✓ A business may also compare its health and safety records with absenteeism data.

Human Resources Strategies

Methods of motivating employees in order to increase business performance earlier.

Below is a range of other strategies that business may use to increase labour productivity, improve
employee retention and reduce absenteeism.

Using financial rewards

Business can be creative in the way they use financial rewards to have a direct impact on
productivity, retention and absenteeism.

Loyalty bonuses – in many companies

Rewards linked to output – some
financial rewards will also be linked to the
organizations will link remuneration to the
length of time employee have been with the
level of output through performance –
company. Other bonuses, such as holidays,
related pay, bonus systems and commission
may also be tied to an employee’s length of
systems. Increasing any of these can boost
service.
output and labour productivity.

Financial Rewards

Attendance bonuses – some employers may

link bonuses to attendance, for example a
£500 bonus linked to 100% attendance over a
six month period.
Employee share ownership
Employee share schemes are another way to remunerate employees. Employees can buy into a
sharesave scheme that allows them to purchase company shares at a fixed price. Employees make
capital gains on these shares as the price increases over time. However, should share prices fall,
employees get their investment back in cash. These schemes encourage long-term service and are a
low risk investment opportunity for employees.

Consultation strategies
employees will feel more involved and connected to their company if they feel as though they have
an influence on the way the business is run. A company may use a range of consultative strategies
and working groups to delegate responsibility and ownership to the workforce. This can often
resolve any negative working practices or issues that could eventually lead to labour turnover or
absenteeism.

Empowerment
Other strategies to motivate employees may include:

Empowerment
Strategies