Understanding labour efficiency

Labour efficiency refers to how effectively labour resources are utilised within a farm business.​

It is evaluated by calculating the ratio of productive livestock or crop units to each full-time equivalent (FTE) labour unit (LU).

This measure helps to assess the productivity of labour input in agricultural operations, providing insights into resource management and potential areas for improvement.

How to Calculate Labour Efficiency

Labour efficiency measures how effectively labour resources are utilised within a farm business.​

It is calculated as the ratio of productive livestock or crop units per full-time equivalent (FTE) labour unit (LU). One full-time equivalent labour unit equates to 240 days per year, based on working five days per week and allowing for 20 days of annual leave. It is common for farm labour to exceed this full-time equivalent of 240 days per year. Labour efficiency calculations accommodate this by dividing the total labour days worked by the standard full-time equivalent days.

For example, if a farm worker completes 300 days of work annually, they are considered to represent 1.25 labour units for efficiency calculations. This figure is found by dividing 300 days worked by the 240 days defined for a full-time equivalent labour unit. Labour and related expenses are the largest single cost in broadacre farming, accounting for between 25% and 40% of total farm costs. Given the substantial cost of labour, it is crucial to maximise its efficiency.

Reviewing labour efficiency targets or key performance indicators each year provides valuable insight into how your business is performing in this essential area of productivity.

What You Will Need to Use This Tool:

• An estimate of the total number of days worked by each labour unit on the farm
• A record of the land area allocated by crop
• A record of the number of Dry Sheep Equivalents (DSE) managed by livestock enterprise
• The ability to categorise labour as employee, contractor, or owner labour

What Are the Outputs of the Tool?

• Labour efficiency by enterprise
• Labour efficiency by type of labour
• A graph showing the whole farm stocking rate