Labor costs account for 60 percent of corporate expenses, according to a 2016 report from Tobias Levkovich, Chief U.S. Equity Strategist for Citigroup. And with a tighter job market, companies have to spend more to attract and retain top talent, Meanwhile, overpayment, time tracking errors, and a higher usage of full-time employees over other types of workers can lead to even more substantial costs.
It doesn’t take much for labor costs to get out of control, but there are ways to get a handle on them while keeping your employees productive and satisfied. Read on for five time-analysis tips to save on employee labor costs.
1. Know how many employees you need
Whether you’re in the beginning stages of hiring or trying to assess an already established staff, take a look at the number of workers you have and if it’s cost-efficient. This will require an analysis of various positions, their duties, and how long it takes each to accomplish pertinent job-related tasks.
You may find two employees are spending half a day’s work each on similar tasks, for example. To make the most of your employee costs, one employee could consolidate those tasks into one full-time position. Meanwhile, the other employee could apply their time and talents to another role within the company that could use some extra attention.
2. Employ seasonal and temporary workers
Knowing the optimal number of employees for your business can be applied to various time periods throughout the year. Instead of jumping headfirst into a stack of resumes for a massive surge in work, take time to understand fully the needs of the work.
For example, you may find that surge is only expected to last a few months (think summertime or the holiday season). Instead of hiring full-time employees on impulse or overworking existing employees, hire only the number you need for the time required. Consult local temp agencies, and publish want ads that state clearly your need for seasonal help.
3. Plan for downtimes and slow periods
Much like taking a look at when you need seasonal and temporary workers, you also need to assess when your company ebbs and flows.
- Are there specific times during the year when projects are not as plentiful?
- Is there a time during the month or week when work is lighter?
Begin to compare monthly reports of hours worked per day, and see if there is an overall trend for certain parts of the year. You can cross-reference this with customer records from your CRM and financial records from your accounting software to understand when customers expect your staff to be on-hand and ready for account help. Do the same for the week.
Are employees working more hours on Tuesdays than on Fridays? If this is the case, you might want to institute a four-day, 10-hour workweek or try out three 12-hour workdays with additional days off. This step could be a permanent switch or something that only occurs during your company’s slow times.
4. Use freelancers and contractors when possible
You can save a lot in labor costs with freelancers and contractors. Instead of paying for benefits you would have offered new full-time employees, you forego many of these costs with freelancers, as long as you don’t blur the line between “freelancer” and “employee.”
To determine if you could use a freelancer, look at your current employment needs and assess which tasks could be done outside of the office or intermittently. Many freelancers and contractors work from home, which allows you to save on office space and overhead. Much like your current employees, you can also suggest freelancers or contractors utilize time tracking software to ensure they’re accurately compensated for time worked.
5. Minimize driving and traveling time
Another huge component of labor costs is driving and travel time. Typically, field agents are compensated for gas, maintenance on company-owned vehicles, and food. To minimize these costs, take the time to see how long it takes field agents to drive or travel to a destination. You can then use this as a baseline to suggest routes with shorter drive times and research cost-efficient airlines.
Additionally, you can advise mobile employees to set up outside meetings when traffic is lighter throughout the day. Workers who travel to partner and client meetings can encounter much less traffic and cut their driving time. When booking flights, see if you can send out workers on days that are not as popular for travel. And where food is concerned, set a reasonable per diem limit for meals and work-related expenses, to cut down on unnecessary spending.
Time-analysis today, time saved tomorrow
It’s easy to see how labor costs can inflate significantly. Managing labor costs can take time and resources many business owners may not have. However, your finances will improve if you take the time to assess not only work time accurately, but also the types of workers needed, downtimes, and travel time.
Knowing these details at on big-picture level can help you to decide where to cut and where to improve. The goal is not only to decrease costs but to make processes and procedures involving your employees more efficient as well.
Chanell Alexander is a writer for TechnologyAdvice. She is a freelance writer and digital marketing strategist. She has over seven years of experience in the nonprofit field and enjoys blending innovative technology solutions with communications. When she is not writing, Chanell enjoys traveling, contributing to video game blogs, and embracing her inner foodie. See what else Chanell has been up to on her LinkedIn profile and Twitter page.