Deloitte issued a study earlier this year stating that a typical Fortune 500 is overspending $30 million dollars a year on labor costs. The study also found that companies this size spend between one to two billion dollars on labor, almost 60% of operating expenses.
Sadly, this data confirms that companies across all industries already know and experience that labor costs are most often the largest expense of running a business. It’s crucial that companies of all sizes manage labor costs efficiently so they maintain long-term sustainability.
Below are four proven ways your organization can better control labor costs and increase employee productivity:
1. Keep Schedules Accurate
The largest cause of increased labor costs are inaccurate schedules. It may be due to too many people working a shift or not being staffed up enough, both lead to losing money over time. By scheduling accurately, organizations forecast labor costs and plan budget more effectively. The days of Excel spreadsheets or pen-and-paper are over. With a cloud-based scheduling platform, you can adjust shifts as needed and create accurate schedules every time.
2. Use a Time Clock
Studies show a range between 63% and 74% of hourly employees clock out before their shift ends. An Accelo report, found that companies pay around $110,000 for the costs of inaccurate attendance tracking annually. Increasing punctuality makes a massive difference in labor costs. Having a way to monitor employee attendance patterns keeps your workforce honest.
With InfiniTime Online’s time clock functionality, you will guarantee that staff members are paid accurately, and that overtime scheduling is sent to managers in real-time.
A time clock is a great way to execute employee reviews and audits. Having clear attendance data at your fingertips allows you to forecast with ease. Additionally, you gain key insights to the biggest source of labor cost—employee absenteeism (for more on employee absenteeism click here).
3. Reduce Employee Turnover
Employee turnover accounts for a significant portion of labor costs. Turnover costs not only apply to worker wages but also hundreds of hours that are spent on sourcing, hiring, and onboarding new employees.
The average business spends $110,000 to replace a mid-level employee with an annual salary of $80,000. By reducing turnover and retaining talent, companies will cut a dramatic portion of their labor costs.
Having an easy to use workforce management system keeps employees engaged, especially when they can request for time off or additional shifts and get responses in real time with the InfiniTime messaging system.
4. Automate Redundant Tasks
Automating redundant tasks lowers labor costs while improving efficiency and quality. As computer software becomes more robust and less expensive, companies need to empower employees with these tools. Payroll processing is one job function with a copious amount of tasks that can be automated.
While investing in software appears to be just an additional labor cost, in the long-run, this investment will pay off, as the tools will speed up and simplify the work. Companies see an ROI within the first 3 months of use. There is no more dual entry. Errors in scheduling, calculating hours accrued, and job costing are eliminated. There is less need for overtime and employees will appreciate being relieved of dull, manual tasks.
The remedy for improving how you manage labor costs comes down to two factors- better awareness of your company’s labor needs and a technically integrated scheduling solution. InfiniTime 9, is a fully hosted SaaS employee scheduling platform which gives you everything you need to schedule better, giving you real-time analytics to forecast better budgets and schedules—ultimately driving down labor costs.