How to Calculate Manpower Utilization

Your business pays employees to work, but not every minute of every day is productive. In fact you pay for a lot of non-productive time. When you get more productivity out of your employees, you produce and sell more. Calculate the ratio of non-productive time to productive time, known as the manpower utilization rate, to determine whether you're getting the hours you're expecting,

Paid Leave

Leave is not part of productive time, so you need to know how many hours of productivity you lose to paid time off each year. This includes vacation, sick days and personal days. Use the maximum days allowed in your company, or perform a study based on actual paid time off.

Travel Time

While travel may be necessary for your business, you lose productivity while workers are in transit. These hours and days add up to non-productive time and will affect your manpower utilization figures.

Meetings

The more time your employees spend in meetings not directly related to their work, the less time they spend being productive. Add up all the hours spent in safety meetings, company-wide conferences and planning meetings. These are hours you pay for where productivity is zero or close to it.

Inefficiency

Employees lose productivity to socializing at work, or through inefficient actions that take too much time to find basic information. Time spent making calls trying to find a subject matter expert in the company would count as inefficient time. In addition, you may have employees working too far from their supplies, meaning they have to walk too far to get the materials they need to do their job. Estimate the amount of non-work time your employees spend on inefficient practices.

Training

You may find it less expensive to train existing employees than hiring new ones, and believe that its long-term effect on your bottom line is positive. However, the time spent in training is non-productive, since it takes employees away from their job-related duties.

The Calculation

Once you have your non-productive time figure, divide it by the total hours you pay for and multiply by 100. The result is a percentage. For example, if you pay for 100,000 hours but determine that 20,000 hours are spent unproductively, divide 20,000 by 100,000. The result is .2. Multiply by 100 and you see that 20 percent of your employee's time is spent away from productive activities. You could also say you have 80 percent manpower utilization.

References

About the Author

Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. He has written about business, marketing, finance, sales and investing for publications such as "The New York Daily News," "Business Age" and "Nation's Business." He is an instructional designer with credits for companies such as ADP, Standard and Poor's and Bank of America.