Calculating and Interpreting Human Resource Data (AQA A Level Business): Revision Note

Using data to make HR decisions

• Businesses collect and analyse HR data to make informed decisions that help improve performance, reduce costs, and plan for future workforce needs

Why HR data matters

• Identify problems

  • High labour turnover or rising costs may indicate poor working conditions, low morale or training gaps

• Plan ahead

  • Workforce data informs recruitment, training, succession planning, and budgeting

• Improve performance

  • Tracking productivity or absenteeism helps managers take action to boost efficiency

• Control costs

  • Monitoring labour cost per unit and employee costs as a percentage of turnover helps businesses stay competitive

Strategic workforce planning

• Data-driven planning helps ensure the business has the right number of people, with the right skills, in the right roles. For example:

  • A retailer planning to open new stores can use HR data to forecast how many staff it will need and how much it will cost

  • A manufacturer may use productivity data to decide whether it needs to recruit more staff or invest in automation

• Good HR planning based on reliable data supports long-term business success and helps avoid costly mistakes like overstaffing or skill shortages

Labour turnover

• Labour turnover measures the proportion of employees leaving a business during a specific time period

• It is expressed as a percentage and is calculated using the formula

Internal and external factors that affect labour turnover

• A rising rate of labour turnover can signal internal human resource management problems such as

  • Poor management leading to workers losing commitment

  • A poor recruitment and selection approach leading to staff leaving soon after starting their job

  • Low wage levels compared to those that could be earned elsewhere

• External factors can also increase labour turnover in a business

  • A buoyant local economy where workers are attracted to employment opportunities elsewhere 

  • Improved transport links that provide an opportunity for workers to seek work across a wider geographical area

The consequences of high labour turnover

Labour productivity

• Labour productivity measures output per worker during a specified period of time

  • It is expressed as a number of units and calculated using the formula

    

• Businesses aim to increase the level of labour productivity to improve competitiveness

The link between high labour productivity and competitive edge

Employee costs as a percentage of turnover

• This metric shows how much of a business’s revenue is spent on paying employees

  • It helps assess how efficiently the workforce is being used

• It is calculated using the formula:

Labour cost per unit

• Labour cost per unit measures how much it costs in wages to produce one unit of output

  • It is a key piece of data to assist with pricing and cost control decisions

• It is calculated using the formula:

Influences on employee costs as a percentage of turnover

1. Wage levels and contracts

   • High wages, overtime pay or generous bonuses will raise employee costs

2. Productivity

   • More productive staff reduce the cost per unit and lower the ratio

3. Technology

   • Automation can reduce the need for labour, cutting costs

4. Industry type

   • Labour-intensive industries like hospitality usually have higher employee costs than capital-intensive ones like manufacturing

5. Revenue performance

   • A fall in revenue (e.g. due to low demand) makes employee costs look higher, even if wages haven’t changed

Examples of how HR data supports decision-making

• Labour turnover

  • High staff turnover might lead a business to invest in better training, improve management, or raise pay to improve retention

    • For example, in 2022, NHS England faced high nurse turnover. It responded with improved retention schemes, including flexible working, leadership development, and mentorship programmes

• Labour productivity

  • Falling productivity could trigger a review of equipment, working conditions, or staff training needs

    • For example, Royal Mail invested in automated parcel sorting and upskilled employees in response to falling productivity during peak online shopping seasons

• Labour cost per unit

  • Rising labour costs may push a business to automate processes or reallocate staff more efficiently

    • For example, Greggs introduced more self-serve tills and centralised some baking operations to reduce labour costs per unit across stores

• Employee costs as % of turnover

  • If employee costs are growing faster than revenue, the business may need to restructure or freeze recruitment

    • For example, Marks & Spencer faced rising wage costs and declining revenues in some departments. It responded by closing underperforming stores and streamlining staff roles