While labor expenses aren’t usually something employers can scrap altogether, we have yet to encounter a business that cannot find ways to reduce them. Lowering labor costs provides an immediate monetary benefit, so it’s easy to measure the ROI, and it’s not as difficult as you may think!
Because so many different factors contribute to your total labor expense, you can target the ones that make sense for your business and still achieve lower costs overall. Read on for three of the most common reasons your labor costs may be too high, and what you can do to get those numbers down!
1. You’re paying employees for time not worked.
Study after study reveals how widespread this type of employee theft actually is. “Buddy Punching” occurs when an employee has their co-worker clock in for them because they’re “only running 5 minutes late and can’t miss their punch!” If you’re using a self-reporting system, it’s even easier for employees to fudge the numbers and round their punch times. Though 5 minutes here and 10 minutes there may not seem like much, these discrepancies can add up to thousands of dollars paid out each year for time not worked.
Fortunately, there is a lot of technology out there now that can help fight this expensive crime. If it’s in your budget, biometric time clocks are highly effective in preventing buddy punching and false reporting. By authenticating punches with unique, non-transferable physical attributes like a fingerprint, you can virtually eliminate this type of theft.
But what about offsite employees? It’s much easier for mobile staff members to get away with time theft than onsite workers. However, just as technology has evolved to prevent buddy punching, many solutions now have mobile capability as well. This technology incorporates GPS tracking to verify exactly where the employee is punching in or out.
For example, if your employee Dave runs deliveries for your company, a system like our Workforce Management Suite can prevent him from punching into an online portal from home twenty minutes before he’s actually scheduled to begin working. His manager could then review the location of the punch and compare it to the location of Dave’s first delivery.
2. You’re paying for unnecessary overtime.
If you don’t have a well-defined plan for managing overtime, it may be eating up a larger than necessary percentage of your labor costs. With just a few simple changes, you can lower the amount of overtime your staff works. This has a greater impact than reducing regular-pay employee hours because of the time-and-a-half compensation of overtime hours.
But won’t my production or customer service suffer? Actually, many SMBs have kept their productivity stable and clients satisfied while decreasing overtime. A few of our tips to successfully decrease overtime are:
- Use temps during peak production periods (this helps you save on benefits, too!).
- Cross-train employees. That way, part-time workers can fill in if you need to have a full-time employee clock out to avoid overtime.
- Make sure employees aren’t clocking in early, clocking out late, or buddy punching enough to accumulate overtime hours.
- Look at the big picture. Which departments rack up the most overtime? How is the entire workforce distributed among departments? Automatic time tracking and scheduling software can make it easy to see these types of things at a glance. You may be surprised at how your human capital is actually being managed!
Tools like SDP’s Workforce Management Suite make it easy to streamline how you manage overtime. By setting up auto-alerts, supervisors can receive notifications when an employee is on the verge of entering overtime. You can also configure your clock to prevent employees from clocking in or coming back from breaks early, taking the burden off your admin staff.
3. Your processes aren’t as efficient as they could be… And you’re paying for it.
If you haven’t brushed up on your knowledge of current HR and payroll processes in a while, it may be time to take another look at that area of your business. Tasks like manual data entry and really anything that’s done on paper (e.g. time cards, handwritten reports) are almost guaranteed to be taking longer than they should be, eating up your employees’ valuable time.
If an automated system is capturing this data, there is no need for a human to be filling anything out. For example, creating schedules with an application that only does spreadsheets was revolutionary thirty years ago, but it’s pretty much archaic now. By exploring options like SDP’s TimeSimplicity, you can optimize your employees, save money, and make life easier for managers and HR personnel. Another plus: you may not need to hire more admin staff as your company grows!
What Do You Think?
Do you see some areas of improvement that could be applied to your own business? Comment below to share what has worked for your company to keep labor costs low! Want a demo of some of the features mentioned in the article? Simply fill out this online form to set one up today! And don’t forget to follow us on Facebook, Twitter, and LinkedIn to make sure you never miss a beat!