The Ultimate Guide to Employee Productivity Formulas

According to Slack’s State of Work 2023 report, 71% of business leaders feel pressured by management to “squeeze more productivity out of their teams.”

This push often leaves leaders scrambling for effective strategies and tools. But here’s the kicker: without a solid understanding of employee productivity formulas, all those efforts go to waste.

Even a basic employee productivity formula can transform this pressure into actionable insights. Identifying a solid baseline of their teams’ productivity helps businesses identify strengths and drive better performance. 

In this guide, we’ll explore employee productivity formulas, why they’re important, and how they can help you maximize your team’s potential. Let’s get started. 

Importance of measuring employee productivity

Measuring employee productivity isn’t just about keeping tabs on work output — it’s also about understanding how work gets done. It helps businesses uncover patterns, optimize processes, and make data-driven decisions that benefit everyone in the company.

The significance of measuring productivity lies in its ability to provide actionable insights into employee performance. Productivity measurements can identify areas where employees may need additional support or resources to enable teams to be more productive.

What is employee productivity?

Employee productivity refers to the efficiency with which an employee produces outputs relative to the inputs used. It’s used to assess the performance of both individual employees and entire teams.

Productivity is about the quantity, quality, and value of the work produced. Productive employees utilize their time and resources to generate profits for the company. Calculating productivity accurately also involves interpreting the value of services produced relative to the effort invested. 

Key metrics for measuring productivity

When calculating productivity, several key metrics should be considered to understand employee performance.

• Output per employee. Measures the total amount of goods or services produced by an employee within a specific period.
• Revenue per employee. Calculates the annual revenue generated by each employee.
• Task completion rate. Tracks the number of tasks completed by an employee within a given timeframe.
• Utilization rate. Measures the percentage of an employee’s time spent on productive tasks versus unproductive activities.
• Quality of work. Assesses the quality of the output produced by employees, ensuring that work quality isn’t compromised for speed.
• Employee satisfaction. Evaluates the level of satisfaction and engagement among employees, which can significantly impact their productivity and overall performance.

External factors like workplace environment and management practices can also influence employee efficiency.

Common employee productivity formulas

Basic productivity formula

The basic productivity formula is simple yet reliable for understanding how effectively your team is working. Use this to calculate productivity:

Productivity = Output / Input

This formula helps businesses track employee productivity by providing a clear ratio between the output generated and the input used.

For example, if you want to calculate productivity based on units produced per hour worked, you might measure the total number of units produced by an employee and divide that by the total hours worked.

• Output: 100 units produced
• Input: 20 hours worked

Productivity = 100 units / 20 hours = 5 units per hour

This formula helps you understand your team members’ efficiency and identify areas where you can improve productivity.

Employee productivity rate formula

Another essential formula for assessing workforce productivity is the employee productivity rate formula. This formula is particularly useful for understanding productivity over longer periods and across teams.

Productivity rate = Total output / Total input

This basic formula allows you to evaluate a team or department’s overall productivity by comparing the total output generated to the total input used over a specific period.

• Total output: 2000 units produced in a month
• Total input: 500 hours worked by the team

Productivity = 2,000 units / 500 hours = 4 units per hour

By calculating the productivity rate for bigger periods of time, businesses can set target productivity goals and monitor progress toward them.

Labor productivity per employee formula

The labor productivity formula identifies an organization’s productivity on a per-employee basis. This formula helps assess the average productivity of employees within a department or across the entire business. 

Labor productivity = Total output / Number of employees

This formula provides a clear view of the average output each employee contributes. It also makes it easier to calculate employee productivity and compare it across different departments or teams.

Example:

• Total output: 5,000 units produced in a quarter
• Number of employees: 50 employees

Labor productivity = 5,000 units / 50 employees = 100 units per employee

The labor productivity formula helps businesses determine the efficiency of their workforce. This metric can identify both strengths and weaknesses in an organization’s productivity.

Productivity per employee formula

The productivity per employee formula measures each employee’s financial contribution to the organization. This formula helps businesses see employee productivity by focusing on the revenue generated per employee.

Productivity per employee = Revenue / Number of employees

This formula provides a clear indicator of how much output each employee generates in financial terms, making it a valuable tool for assessing overall profitability.

Example:

• Revenue: $1,000,000 in a year
• Number of employees: 100 employees

Productivity per employee = $1,000,000 / 100 employees = $10,000 per employee

Regularly measuring productivity helps companies develop actionable strategies to increase productivity.

Employee productivity ratio formula

The employee productivity ratio formula can be used to compare productivity across different teams or periods. It’s helpful for organizations that want to measure employee productivity consistently.

Productivity ratio = Output / Input ratio

This formula is straightforward: divide output by the input ratio and use the results as comparison benchmarks.

Example:

• Output: 1,500 units produced
• Input: 300 hours worked

Productivity ratio = 1,500 units / 300 hours = 5 units per hour

The productivity ratio offers valuable insights into how efficiently different teams or departments perform — especially when dealing with repetitive tasks.

Employee productivity index formula

The employee productivity index formula is a powerful metric for tracking changes in productivity over time. By comparing current productivity to a base period, businesses can track performance trends and the impact of various campaigns.

Productivity index = (Current period productivity / Base period productivity) x 100

This standard productivity formula lets organizations measure relative productivity changes across time periods, whether improvements or declines.

Example:

• Current period productivity: 12 units per hour
• Base period productivity: 10 units per hour

Productivity index = (12 / 10) x 100 = 120%

A productivity index of 120% indicates a 20% improvement in productivity compared to the base period. This metric can help businesses identify the effectiveness of their strategies, such as training and development opportunities or initiatives for employee engagement and a more positive work environment.

Advanced productivity formulas

Productivity formula in operations management

This advanced approach uses the multifactor productivity formula to evaluate efficiency across various resource categories.

Multifactor productivity = Output / (Labor + Capital + Materials)

Instead of focusing on a single factor, this formula provides a more detailed understanding of productivity by incorporating inputs like labor, capital, and materials.

Example:

• Output: 5,000 units produced
• Labor: $1,000
• Capital: $2,000
• Materials: $1,500

Multifactor Productivity = 5,000 units / ($1,000 + $2,000 + $1,500) = 5,000 units / $4,500 = 1.11 units per dollar

The multifactor productivity formula allows businesses to analyze employee activity data in conjunction with other resources. This helps provide a more holistic view of productivity. While the specific inputs may vary, the general principle remains: understanding how different resources contribute to overall output helps teams optimize resource planning and allocation.

How to calculate employee productivity in Excel

It probably isn’t a surprise, but you can also use spreadsheet programs like Excel to calculate employee productivity. It’s the same process as performing arithmetic operations on numerical data, albeit from a different perspective.

1. Prepare your data
   • List your employees in column A.
   • Enter the outputs (e.g., units produced) in column B.
   • Enter the inputs (e.g., hours worked) in column C.
     
2. Set up the basic productivity formula
   • Label column D Productivity.
   • Enter the formula =B2/C2 in cell D2 to calculate productivity for the first employee.
   • Drag the fill handle down to apply the formula to the rest of the rows.
     
3. Calculate revenue per employee
   • Enter the total revenue data in column E. Fill out all relevant rows.
   • Label column F Revenue per employee.
   • Enter the formula =E2/C2 in cell F2.
   • Drag the fill handle down to apply the formula to the rest of the rows.
     
4. Set up the productivity index
   • Enter the base period productivity (e.g., average productivity) in a separate cell, say G1. In this example, cell G1’s name will be a numerical value instead of a label.
   • Enter the formula =(D2/$G$1)*100 in cell G2. The dollar signs make cell G1 an absolute reference; the value of cells filled out by dragging down the handle will always be the value of cell G1.
   • Drag the fill handle down to apply the formula to the rest of the rows.
     
5. Add multifactor productivity
   • If you have additional inputs like capital and materials, enter them in columns H and I.
   • Label column J Multifactor productivity.
   • Enter the formula =B2/(C2+H2+I2) in cell J2.
   • Drag the fill handle down to apply the formula to the rest of the rows.

Practical examples of employee productivity calculations

Employee productivity can be calculated in different contexts. Here’s a look at how these formulas can be applied in various industries.

Manufacturing businesses

The manufacturing sector is an easy example because productivity is often measured by comparing the output (units) to the input (hours of labor). Even the basic productivity formula is instrumental in determining how efficiently businesses use labor resources.

Professional services industry

In the service industry, productivity is often measured by the revenue generated per employee. For example, in a consulting firm, the value lies in the expertise and hours billed by consultants. In this example, productivity calculations help teams understand how much revenue each consultant generates.

Remote work teams

Increased productivity is often the biggest selling point of working remotely. There’s statistical data to back that up — which is made possible by (you guessed it) productivity calculations.

Using productivity indices to compare current productivity with a base period can reveal trends and shifts in performance. This is particularly helpful for formerly office-based teams that recently transitioned to remote work.

Automate productivity tracking with Hubstaff

While manually calculating productivity is an easy way to get started, you can access more detailed metrics and insights with workforce management tools like Hubstaff. 

Hubstaff not only automates the time tracking process but also uses this data to show users real-time productivity and workforce analytics data.  With Hubstaff, you can move beyond basic calculations and gain a better understanding of how your team works. You’ll access features like:

• Time tracking and timesheets. Have your team track time on the web, mobile, desktop, or with the Chrome extension. Then, watch as Hubstaff seamlessly converts the time to detailed, itemized timesheets broken down by project, task, and client.
  
• Employee productivity. See real-time app and URL usage, project spending, and gauge employee productivity right from the dashboard. You can also see utilization rates, balance meeting and focus time, and more with the Insights add-on.
  
• Payroll. Choose from an array of payroll solutions like PayPal, Wise, Payoneer, and Deel and pay each member of your team on their preferred app right from Hubstaff.
  
• Reporting. Pull up to 20 different reports for Time and Activity, Expenses, Payments, and more. You can also customize your dashboard for real-time data right at your fingertips. 
  
• Scheduling. Reach peak efficiency with intuitive scheduling features. Use performance insights to plan shifts during each employee’s most productive hours to optimize efficiency.
  

Hubstaff also integrates with over 30 popular apps, meaning you can easily implement it into your workflow without any process slowdowns. Try Hubstaff and see what it can do for your business.

Conclusion

When you’re dealing with productivity, you’ll quickly realize that one of your biggest obstacles is guesswork. Productivity formulas remove that from the picture so you can make decisions with hard, objective data.

Start incorporating these formulas into your workflows. Use them to benchmark your current performance, set realistic goals, and track progress over time. And when you’re ready to take productivity to an even higher level, use a comprehensive solution like Hubstaff to help your team reach their productivity potential.