3.5.3 Human Resources

Question 1

Define labour productivity.

Answer 1

• A measure of output per employee

Question 2

How do you calculate labour productivity?

Answer 2

• Total output/ Average number of employees

Businesses aim to increase the level of labour productivity to improve competitiveness

Question 3

Analyse labour productivity.

Answer 3

• Higher labour productivity, leads to lower labour cost per unit, improved efficency, creating a competitive edge

Question 4

Define labour turnover.

Answer 4

• Measures the proportion of employees leaving a business during a specific time period
• Expressed as a %

Question 5

What is the formula for labour turnover?

Answer 5

• Number of staff leaving/ Average number of staff X100

Question 6

What can a rising rate of labour turn over cause?

Answer 6

Can signal internal human resource problems like:
- Poor management leading to workers loosing commitment
- A poor recruitment and selection approach leading to staff leaving soon after starting their job
- Low wage levels compared to those that could be earned elsewhere

Question 7

What external factors can also cause a rise in labour turnover levels?

Answer 7

• A buoyant local economy where workers are attracted to employment opportunities elsewhere
• Improved transport links that provide an opportunity for workers to seek work across a wider geographical area

Question 8

What are the problems & opportunities of high labour turnover?

Answer 8

Problems:
- Increased recruitment and selection costs
- Increased induction and training costs
- Lower productivity levels as workers settle into new roles

Opportunities
- Workers with existing skills can be recruited to reduce the need for training
- New ideas & creativity introduced to the business
- New perspective & approaches to problem-solving can improve business performance

Question 9

Define labour retention.

Answer 9

• Measures the proportion of employees remaining within a business during a specific time period

Question 10

What is the formula for labour retention?

Answer 10

• Number of staff remaining/Average number of staff X100

A high level of labour retention means that few staff are leaving the business during a given period

Question 11

Define absenteeism.

Answer 11

• The absenteeism rate is a measure of the proportion of staff were absent from work during a specific period of time (e.g. a day, week or month)

Question 12

What problems can high levels of absenteeism cause for a business?

Answer 12

• Absence due to illness requires sick pay to be paid
• Hiring temporary staff to cover for those absent increases costs
• Output is likely to be temporarily reduced if staff are key to production process
• Other staff may become demotivated if they have to constantly cover for absent workers
• A wider culture of absenteeism may develop

Question 13

What human resource strategies are there to improve employee performance

Answer 13

• Offer financial rewards- e.g. Increased pay rates/ Profit share schemes- Paying workers more/sharing profits may increase commitment & effort, leading to higher output & productivity
  If financial rewards are greater than those of other employers, staff are less likely to want to leave
  Bonuses & commissions are only paid when they have been earned or if targets have been met- motivation
• Offering employees shares in a company- Rewarding senior executives & managers with shares may increase their commitment to achieving objectives
  Employees who own shares in the business may work harder & take less time off as they have a financial stake in the success of the business

Consultation
- Consultation involves managers obtaining the views of employees when making decisions
- Workers are likely to feel more involved within the business & may be less likely to take days off work or leave the business