Summary Human Resources and Competitiveness

Theme 3 Topic 15
Human Resources and Competitiveness
Labour Productivity
Labour Productivity – measures the output per worker

Labour Productivity = Total Output (per period of time)
Average Number of Workers (per period of
time)

Why is Labour Productivity Important for Competitiveness?

 An important measure of efficiency
 Higher labour productivity should result in lower unit costs
- The fixed salary costs of each worker are being spread over more units
 Lower unit costs enables the business to charge lower prices than their rivals or they can charge the
same price and enjoy a higher profit margin

Labour Productivity Can be Improved By:

 Investing in new machinery
 Training
 Financial incentives for improved performance



Labour Turnover
Labour Turnover – the proportion of staff leaving a business over a period of time

Labour Turnover = Number of Staff Leaving x 100
Average Number of Staff

Why is Labour Turnover Important for Competitiveness?

High rates of labour turnover often indicate problems of low morale. This could be caused by:

 Poor pay and working conditions
 Poor management
 Lack of training
 Lack of job satisfaction

Problems resulting from high labour turnover:

 Increased recruitment and selection costs
 Increased induction training costs
 Low productivity as new employees take time to learn the skill required

However, some labour turnover is good for a business:

 New staff can bring in new ideas
 Existing staff who have worked a long time for the business may become set in their ways