Human Resource Performance Indicators

Analysing human resource performance involves measuring key indicators that reveal how effectively a business is managing its workforce. These quantitative measures allow businesses to benchmark, set targets, identify problems and evaluate the impact of HR strategies.

---

Labour Turnover

Labour turnover measures the rate at which employees leave a business over a given period, usually one year.

Formula

Labour Turnover (%) = (Number of employees leaving during the year / Average number of employees during the year) x 100

Worked Example

A business has an average of 400 employees during the year. During that year, 60 employees leave.

Labour Turnover = (60 / 400) x 100 = 15%

Interpreting Labour Turnover

Level	Interpretation	Implications
Low turnover (e.g., < 5%)	Employees are staying — may indicate high satisfaction	Stability but risk of stagnation; fewer new ideas
Moderate turnover (e.g., 10-15%)	Healthy churn — some natural movement	Balance between stability and fresh perspectives
High turnover (e.g., > 20%)	Employees are leaving frequently — potential problems	High recruitment and training costs; loss of experience

Causes of High Labour Turnover

• Poor management and leadership
• Uncompetitive pay and benefits
• Lack of career progression opportunities
• Poor working conditions or organisational culture
• Better opportunities elsewhere in the labour market
• Mismatch between the job and the employee's expectations at recruitment

Strategies to Reduce Labour Turnover

• Improve recruitment and selection processes to ensure better job-person fit
• Offer competitive pay and benefits packages
• Provide clear career development pathways
• Invest in management training to improve leadership quality
• Conduct exit interviews to understand why people are leaving

Exam Tip: High labour turnover is not always a bad thing. In some industries (e.g., hospitality, retail), higher turnover is normal and expected. The key question is whether turnover is voluntary (employees choosing to leave) or involuntary (redundancy, dismissal). Voluntary turnover of key staff is most damaging.

---

Labour Productivity

Labour productivity measures the output per worker over a given period.

Formula

Labour Productivity = Total Output / Number of Employees

Worked Example

A factory produces 50,000 units per month with 200 workers.

Labour Productivity = 50,000 / 200 = 250 units per worker per month

Factors Affecting Labour Productivity

Factor	Effect on Productivity
Training and skills	Better-trained workers produce more per hour
Motivation and engagement	Motivated workers work harder and more efficiently
Technology and capital investment	Better equipment increases output per worker
Management quality	Effective management organises work efficiently
Working conditions	Safe, comfortable environments reduce errors and absences
Experience	More experienced workers are typically faster and make fewer mistakes

Improving Labour Productivity

• Invest in training and development
• Introduce performance-related pay to incentivise output
• Upgrade technology and equipment
• Improve workplace layout and processes (lean production techniques)
• Empower workers to make decisions and solve problems

Important: Increasing labour productivity does not necessarily mean making people work harder. It often means working smarter — using better processes, tools and skills to produce more from the same input.

---

Employee Costs as a Percentage of Turnover

This indicator shows the proportion of a business's revenue that is spent on employee costs (wages, salaries, employer National Insurance contributions, pension contributions, training costs, etc.).

Formula