Labour productivity

Labour productivity measures output per unit of labour input, usually output units divided by labour hours worked, and is the standard non-financial efficiency measure on operating and divisional performance reports.

ByHoang TruongUpdated July 11, 2026

See it move

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A packing line produces 2,400 units in 300 labour hours in week one, a productivity of 8 units per hour. In week two it produces 2,750 units in only 275 hours, lifting productivity to 10 units per hour, a 25% rise even though weekly output grew by just 350 units. Labour productivity compares physical output to hours worked, independent of wage rates.

Where it fits

SubjectManagerial AccountingCoreTopicDivisional Performance MeasurementCoreTopicStrategic Performance & the Balanced ScorecardCore

The formula

LaTeX

LP = \frac{Q}{H}

Variables

$L P$: Labour productivity (units per hour)
$Q$: Output (units)
$H$: Labour hours worked (hours)

Gives output generated per labour hour; used to compare operating efficiency across periods or divisions independent of wage rates.

Check yourself

PracticeCORE

A production cell produced 6,000 units last month using 400 labour hours. What was labour productivity for the month?

Select an answer to check your understanding.