Labor productivity is a concept used to measure the worker’s efficiency. It is calculated as the value of output produced by a worker per unit of time, such as an hour. By comparing the individual productivity with average, it can be identified whether a particular worker is underperforming or not.
Labor productivity is a theory used to calculate the worker’s efficiency. One may calculate it as a worker’s output per unit of time, such as an hour. Then, comparing individual productivity with the average, whether a particular worker is underperforming can be determined.
You can measure employee productivity with the labor productivity equation: total output / total input.
Let’s say your company generated $80,000 worth of goods or services (output) utilizing 1,500 labor hours (input). To calculate your company’s labor productivity, you would divide 80,000 by 1,500, which equals 53. This means that your company generates $53 per hour of work.
You could also look at labor productivity in terms of individual employee contribution. In this case, instead of using hours as the input, you would use number of employees.
Let’s say your company generated $80,000 worth of goods or services in one week with 30 employees. You would divide 80,000 by 30, which equals 2,666 (meaning each employee produced $2,666 for your company per week).
Labor Productivity = (Labor output/labor input)
In an apparel manufacturing factory, industrial engineers, factory managers, and line supervisors measure the number of garments produced by a line of sewing machine operators in a specific time frame. Generally, the factory works 8 to 10 hours a day. The total production (output pieces) from a production line and the total labor involved in producing those pieces are required to calculate labor productivity.
Example:
Total garment production in day =1200 pieces
Total labor (sewing operators and helpers) involved in making the garments = 29
Shift Time in Minutes = 600 minutes (10 hours)
Labor productivity =(Total pieces produced/ Total labor input) per 10 hours
= (1200/29) Pieces
= 41.3 pieces.
The calculation of labor efficiency is shown below. Consider the above data.
- SAM (Standard allowed minutes) of the garment = 9.7
- Minutes produced by each labor : (41.3 pieces X 9.7) = 401 minutes
- Available time: 600 minutes per shift
So, Labor efficiency = (Produced minutes/available minutes) = (401/600)*100% = 67%
The concept is helpful for companies in labor productivity since it shows the worker’s performance. Thus, one may use it to set a standard productively, based on which the incentive schemes for remunerating the good performing workers can be developed. It also helps businesses consider if they need to take any steps to improve productivity levels.
