Labor productivity is a measure of how much value a business can create with its workforce. Labor productivity is concerned with the amount of output that is obtained from each employee. In other words, we can measure labor productivity as the ratio of total output to the number of workers used to produce the output.
Productivity can also be calculated by measuring the number of units produced relative to employee labor hours or by measuring a company’s net sales relative to employee labor hours.
Overall employee labor productivity is calculated by dividing the goods and services produced by the total hours a company’s employees during a certain period of time.
Labor Productivity = Total Output / Total Input (Man-Hours)
Example: Product Unit
Suppose a company had an output of 30,000 units last month, while its input was 3,000 hours of labor. The productivity for the company is:
- Labor Productivity = 30,000 / 3,000
- = 10 Units / Per Hour
Example: Sales volume
Suppose Company A produced $10,000 worth of product in one week utilizing 1,000 man-hours. What is your company’s labor productivity?
- Labor productivity = $10,000 / 1,000
- = $10 / hour
Other Productivity Calculators