labour productivity is a measurement of the efficiency of employees within a business.
labour productivity = output per period ( units ) / no. of employees
for example : 5000 units / 25 employees
= 200 boxes per employee per day
if workers are productive , the cost of overheads will be spread out and unit costs will be reduced
METHODS OF EMPLOYEE REMUNERATION:
day work
piece work
bonus / incentive schemes
day work : a method where employees are paid a fixed rate based on the amount of time spent at work regardless of the output produced. usually used where its difficult to measure the output of an employee , and where quality > quantity
labour cost = hourly wage rate x hours worked
advantages ;
- labour costs are easy to plan and budget for
- quality may improve as employees are not under pressure
- employees know the level of remuneration in advance so less conflict
- decrease in absenteeism since its directly related to their presence at work
disadvantages ;
- no incentive to increase productivity and output
- rewards all employees equally regardless of performance
- supervision will be required to make sure employees are working
- inefficient working may require extra overtime working , so higher costs
piecework : when an employee is paid based on the amount of output they produce. they are paid an agreed amount for each unit of goods completed. this is often used when the quantity of output is important and work can be divided into smaller tasks which are easier to complete
labour cost = rate per piece produced x quantity produced
advantages ;
- payment of wage directly linked to output
- employees are encouraged to work hard
- employees work quicker
- more efficient workers earn more
disadvantages ;
- costs are unpredictable
- quality may suffer
- employees cant plan their income beforehand as its directly linked to output
bonus scheme ( individual ) : this is a combination of day work and piecework systems , they offer an encouragement to employees on a day rate. the employee is paid a set day rate and receives additional payment. there are many ways to decide how the bonus payment works.
labour costs = day rate + proportion of time saved
advantages ;
- some element of wages linked to output , productivity should increase
- employees will have a minimum guaranteed wage
- more efficient workers will earn more
- opportunity to encourage non-production staff
disadvantages ;
- difficulty in establishing bonus rate with staff
- quality may suffer
- remuneration calculations may be more difficult and costly to operate
bonus scheme ( group ) : bonus schemes can also be used for groups , this is suitable for when employees work in teams and its more difficult to share output between individual employees.
advantages ;
- increased productivity leading to greater output , decrease in unit costs
- greater co - operation between workers
- could increase employee flexibility
disadvantages ;
- less direct incentive compared to individual bonus system
- less efficient employees in teams will receive the same bonus as efficient ones
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