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Human resource measures: productivity, turnover, retention and absenteeism
Edexcel IAL Business · WBS13 Business decisions and strategy
A business's people are a major source of competitiveness. Four measures show how well a workforce is performing and how stable it is. The specification asks you to calculate, interpret and criticise them.
Labour productivity
Labour productivity = output per period / number of employees.
Example: 48,000 units a month by 120 workers = 400 units per worker per month.
Higher productivity lowers labour cost per unit, improving competitiveness. It can be raised by training, better equipment, motivation and better working methods. For services, output may be measured as customers served or revenue per employee.
Labour turnover and retention
- Labour turnover = number of staff leaving in a year / average number of staff employed x 100. Example: 18 leavers, average 150 staff: 12%.
- Retention rate = number of staff with one year's service or more / number employed one year ago x 100. Example: 135 of the 150 employed a year ago are still there: 90%.
High turnover means costs of recruitment and training, lost skills and lower morale; some turnover brings fresh ideas and can cut costs if leavers are not replaced. Retention shows whether experienced staff stay.
Absenteeism
Absenteeism rate = number of staff days lost to absence / total number of possible working days x 100. Example: 360 days lost out of 150 staff x 240 days = 36,000 possible days: 1%.
High absenteeism disrupts production and service, raises costs (cover staff, overtime) and may signal low motivation or poor working conditions.
Limitations of the measures
- Productivity ignores quality: workers may rush and make more mistakes.
- Output per worker depends on capital equipment, not just effort.
- Turnover figures do not show who left (valued staff or poor performers) or why.
- Absence figures do not separate genuine illness from low morale.
- All need comparison with past years, competitors and industry averages, and they show symptoms rather than causes.
Worked example
A call centre had an average of 80 staff. During the year 20 staff left. Calculate labour turnover and suggest what it might indicate.
- Turnover = 20 / 80 x 100 = 25%.
- One in four staff left in a year: recruitment and training costs will be high and service may suffer as new staff learn.
- It may indicate low pay, stressful work or poor management, though call centres often have high turnover across the industry, so a comparison is needed.
Answer: 25%: high, suggesting a retention problem, but compare with the industry.
Check yourself
- A factory produces 36,000 units a week with 150 workers. Calculate labour productivity.
Show answer
240 units per worker. 36,000 / 150 = 240 units per worker per week.
- A business employed an average of 240 staff. During the year 30 staff left. Calculate labour turnover.
Show answer
12.50 %. 30 / 240 x 100 = 12.50%.
- A year ago a firm employed 200 staff. Of these, 172 are still employed today. Calculate the retention rate.
Show answer
86.00 %. 172 / 200 x 100 = 86%.
- A firm has 50 staff who could each work 230 days a year. In total 575 staff days were lost to absence. Calculate the absenteeism rate.
Show answer
5.00 %. Possible days = 50 x 230 = 11,500. Rate = 575 / 11,500 x 100 = 5%.
- Output rose from 40,000 to 46,000 units while the workforce stayed at 100. Calculate the percentage increase in labour productivity.
Show answer
15.0 %. Productivity: 400 to 460 units per worker. Increase = (460 - 400) / 400 x 100 = 15%.
- Which is a limitation of labour productivity as a measure of workforce performance?
- It cannot be calculated for manufacturing
- It ignores the quality of the output
- It includes the cost of capital
- It measures how many staff leave
Show answer
It ignores the quality of the output. More output per worker may come with more mistakes.
- Which is the most likely cost of high labour turnover?
- Lower wage costs per worker
- Higher retention of experienced staff
- Fewer new ideas entering the business
- Higher spending on recruitment and training
Show answer
Higher spending on recruitment and training. Replacing leavers costs money and time.
- Explain why a high rate of absenteeism could reduce a business's competitiveness.
Show answer
Absent staff disrupt production and service, and the business must pay for cover or overtime, so costs rise and quality or customer service falls compared with rivals.. Effect on operations, then on costs or quality relative to rivals.
Sources
Last updated 8 November 2026. Spotted a mistake? Tell us.