Reduce Labor Expense with Stringent Management

Employees are both assets and liabilities. They add value to the business (we hope), but they also come at great expense. In service industries, labor costs can top 80% of all expenses. However, that number is not just only the wages paid. It also includes the cost of overtime, absenteeism, late arrivals and early departures, and abuses of the allotted time for breaks. Hourly wages are set for each employee, but you can reduce labor expenses with careful management in key areas.

Implement and Monitor Policies that Affect Payroll Costs

Generally, payroll policies and procedures govern how wages are measured, when payroll is calculated, and how employees receive their wages. However, the labor expenses will be unnecessarily higher if employee time is not tightly managed. For example, just one employee who clocks in five minutes early for every shift will cost you hundreds of dollars over a year. Multiply that by 20 employees, and that small theft totals a large loss in profit. Frequently, the employee was not trying to do anything untoward; instead, policies were not clear and not enforced.

Unfortunately, nearly half of unmonitored employees intentionally exaggerate the hours they worked—over 20% will add 30-60 minutes per day. Some might ask another employee to clock in for them when they are late arriving, or they will report hours dishonestly. These employee assets quickly become liabilities that risk the health of your small business. Therefore, your company policies are about more than worker pay. From the hire date, every employee should be well-versed in company policies on arrival and departure times, overtime limitations, and break schedules. Do not tolerate inaccurate time reporting and dishonesty.

Develop Collaborative Employees

On the flip side, most of your employees are honest and want to contribute. They are engaged employees who feel accountable for your business. They think like an owner and know that their success is dependent upon your success.

As you develop engaged employees who understand more about your business, they will cooperate as a team to improve payroll costs. Absenteeism will go down as they engage and plan time off. Overtime will be reduced when employees work collaboratively to cover shifts. When good employees understand how their actions impact payroll costs, they will work collaboratively so that everyone will benefit.

Improve Scheduling Methodology

Automate and simplify your scheduling process with employee-friendly software. Streamlined scheduling saves you time while providing a simple platform to manage hours and employee communication. If someone needs to cover their shift, they can do so more efficiently with a shared platform. Managers can approve changes instantly or approve overtime if needed. When everyone is aware of staffing levels and hours, teams work together more productively.

Meeting payroll demands is one of the hardest aspects of running a business, but it also the most fraught with fraud and deception. However, you can improve your employee productivity and reduce excessive labor expenses with policies and control tools. With stricter rules and effective scheduling, employee labor expenses will decline—and this means more direct profit for your business.

Author Profile Jon Forknell is the Vice President and General Manager of Atlas Business Solutions, Inc., a software marketing company specializing in employee scheduling software, including ScheduleBase employee scheduling software, and other business software solutions. In the past, Jon has been recognized by the U.S. Small Business Administration as a SBA Young Entrepreneur of the Year. For many years, Atlas Business Solutions has been named one of Software Magazine’s Top 500 Software Companies.