How much an employer pays for the labour required to produce each unit of a good or service. Unit labour cost can be calculated by dividing a worker’s hourly (or annual) labour cost, by the amount (in physical units or value terms) that they produce during that hour (or year). It is thus the ratio of labour costs to productivity. Companies try to reduce their unit labour cost, either by increasing productivity (the denominator) or by reducing labour costs (the numerator).
Definition