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Strategies for Managing Your Company's Labor Costs


Many U.S. businesses are struggling to stay competitive in the market while labor costs are on the rise. Managing your labor costs and controlling staff budgets is essential to maximizing productivity and keeping your finances in line, while offering employees the best experience possible. With automated time and labor solutions, companies can use scheduling strategies to keep labor costs down, maintain labor budget oversight, optimize employee schedules, and keep controls on administrative costs. Here is a closer look at what business leaders need to know.

Why Labor Costs Matter

According to the Bureau of Labor Statistics, labor costs posted the sharpest increase in over five years in the second quarter of last year. In addition, states are revisiting their minimum wage regulations and health care reform is taking effect for many businesses. Companies need to be more cognizant of their resources and expenditures. In labor-intensive industries, labor is often the single largest line item on the budget sheet. As a result, keeping close controls on labor expenses can be one of the best ways to increase profits over time.

Labor Cost Management is Complex

Managing staff scheduling is an important part of both maximizing productivity and reducing unnecessary expenses. The ability to achieve this requires two levels of visibility. The first is the ability to review labor schedules to ensure that they’re functioning optimally — individually and at the department or unit level. The second is the ability to evaluate labor schedules historically to find opportunities for increased efficiency. Many costs associated with labor are due to scheduling complications, rather than to actual work completed. For example, companies that deal with ongoing understaffing can see increased staff costs. As employees cover hours in understaffed departments, they’re pushed into overtime hours. Without visibility into the scheduling process, it’s easy for companies to avoid making hires that could help save them money in the long-term. Similarly, monitoring individuals and departments for hours worked and overtime triggers is a key component to managing your budget. It’s also an important part of staying in compliance with federal healthcare regulations, where hours worked can impact which employees are eligible for benefits and whether an employer is subject to Employer Shared Responsibility provisions.

Time and Labor Technology Automates Key Processes

A time and labor technology solution can help. It minimizes the management hours associated with overseeing staff time by automating time-off requests, providing employees with self-service functionality for routine tasks, and streamlining the application of complicated payroll/time rules. Managing labor budgets becomes easier, as your executives and managers have real-time access to reports from a single integrated interface. It’s possible to view reporting information for individuals, departments, and other units. Examining cost targets against productivity benchmarks helps keep labor planning on target, while maximizing workforce effectiveness. Alerts can be set up to notify you when certain thresholds are being approached.

Controlling your labor costs can help your company maintain a competitive edge in a demanding market.


This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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