How to Calculate Labour Productivity

Explain : Labour Productivity

Labour productivity

Labour Productivity is a key performance indicator which shows how well each unit of labour is used to make a unit of output. It is commonly used in operations management and strategic analysis to compare the productivity of workers in different ways such as in the same or different industries and between manufacturing plants or work sites within an industry or a company.

This measure is also used in the service industry such as fast food restaurant chains, retail banking services and insurance companies just to name a few. Operations managers are regularly concerned with productivity measures as they are usually aiming to maximize the amount of outputs per unit of input, in this case labour hours or labour costs.

Formula for Labour productivity
Labour Productivity = Units of Output/ Units of Labour

The units of Labour refer to the units of labour used in creating the Units of output in the above formula. In some cases the Units of labour are substituted by total labour costs to compare labour production costs between different manufacturing facilities or regions.