Page 129 - F2 - MA Integrated Workbook STUDENT 2018-19

Accounting for labour

Labour ratios

4.1 Labour turnover

Labour turnover is a measure of the proportion of people leaving relative to
the average number of people employed.

Number of leavers who required replacement ÷ average number of
employee’s × 100

Test your understanding 4

At 1 January a company employed 5,500 employees. Due to expansion the
number of employees increased to 5,800 by 31 December. During the year
400 staff left the company and were replaced. What was the labour turnover
rate?

A 4.8%

B 7.3%

C 6.9%

D 7.1%

4.2 Labour efficiency

The labour efficiency ratio measures the performance of the workforce by
comparing the actual time taken to do a job with the expected or standard
time.

Standard hours for actual output ÷ actual hours worked to produce output ×
100

4.3 Labour capacity

The labour capacity ratio measures the number of hours spent actively
working as a percentage of the total hours available for work (full capacity
or budgeted hours).

Actual hours worked to produce output ÷ total budgeted hours × 100

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