Labour Management 101: Rising Above the Increasing Labour Costs



One of the highest costs in the world of business is labour; as a business owner, perhaps you're aware of it. It can account for as much as 70% of your overall business costs, including benefits, employee wages, payroll, and other taxes


According to a recent survey, HR management only spends 15% of their time dealing with labour costs due to other more urgent tasks getting in the way. 


However, this is where a great opportunity lies for you and your HR management to step out of the comfort zone and pitch in essential value to an aspect that has long been dominated by finance. Time to execute methods that effectively allow you to stay afloat despite the rising labour costs


While not a single mending will solve such ceaseless hurdles, some of the tactics below are helping tons of businesses stabilise these challenges. So, how will you rise above the increasing labour costs? Find out below. 



Offer Perks That Don't Hit Your Profit 


Today, the work-from-home option has transcended quickly from a benefit to an expectation to most, if not all, employees. According to a survey, 43% of employees view the flexibility to work remotely as a necessity. As a matter of fact, this option appeals more than those big-ticket perks such as free gym memberships or tuition assistance. 


Unlimited paid time-off is another affordable perk to consider. Implementing this method helps remove the need to send payments for unused time whenever an employee leaves your company. Companies that utilise this method can see improvements in terms of productivity and profit. Hence, increasing revenue without surges in employee time-offs.  



Expand Options for Employment Types 


It's ideal you consider using more part-timers and freelancers instead of relying too much on your full-time employees. Doing so helps you manage staff costs through reduced benefits, taxes, and overstaffing. Although freelancers may cost more per hour than full-time employees, most company owners say it's way more cost-efficient as they tend to be more productive. 


Also, never underestimate part-timers as they can be your steadfast and most productive workers. Changes in terms of priorities and demographics mean that more people prefer working as part-timers than before. For example, a great number of parents in an online job survey reported a dramatic increase in wanting to work part-time. 


What makes this type of work winning are these significant details: 


  • Focus on roles with specialised skills so that shifts are utilised effectively. 

  • Offer "voluntary" benefits (e.x. financial counselling and dental insurance) that are paid via payroll deductions.



Photo by: Rachel Claire | Pexels


Repulse Extra Time 


Check your employee schedules and examine how overtime is transpiring. Doing so can curb the rising overtime costs that can eat away your company's income. To get wind if the working pace isn't teaming up with your current number of employees on a certain shift, time to compare different shift patterns. Look at which part you can improve to boost productivity and minimise the need for overtime. 


You can easily key out shifts that need to be filled if you have good workforce management software in place. Not just that, you can even track overtime and flag discrepancies effectively. We discovered that 30% of companies today are utilising time-tracking or time clock apps. 


Make sure to cross-train your employees regardless if you have a manual or cloud-based system solution. The more options you have for completing tasks and shifts, the higher the likelihood of reducing overtime. 

 


Consider a Performance-Based Scheme 


Linking pay to performance that favours your top-performing employees can provide your business long-term benefits, financial-wise. In all likelihood, top-performing companies are using a performance-based pay system. However, you need to evaluate what merits a bonus or salary increase.  


For instance, you could give raises after employees fulfil tasks or transcend annual sales goals. To achieve this, make sure these guidelines are transparent and clear; applying them evenhandedly to avoid any sense of prejudice. 


Evaluating how you pay off employees on a regular basis and apportioning their time can help you attract and keep top-performing workers. Keeping productivity at its peak as well as protecting your business' financial aspect, at that. 



Labour Cost—What Is It? 


Generally, the definition of labour cost is when a business' overall labour expenses are broken down into indirect and direct costs. 


  • Direct labour costs - includes employee benefits, hourly wages, and payroll taxes paid by you for employees that are part of the production of goods and services. 

  • Indirect labour costs - refer to workers who are not actively part of the production of goods and services (e.g. marketing, human resources, and accounting). 



Ways to Go Ahead the Rising Labour Costs 


In order to stay above the increasing costs of labour, you have to counter workplace efficiencies. If you fully understand your current trends and labour costs, you'll have to find ways to minimise costs. And to do that, here are some ways to help you out. 


  • Choose a streamlined solution for HR, timekeeping, and payroll for efficient processes and accurate labour data to your shareholders. 

  • Implement a time and attendance software solution to make sure employees are properly clocking in and out. 

  • Automate and centralised administration benefits to help your employees through selection of benefits, as well as determine plans and packages appealing to your workers. 


Across the world, regardless of business industry, labour costs are rising. Hence, leaders and owners are keenly assessing areas that can possibly and effectively reduce spending. That said, having the right technology can give your HR management the awareness of important labour parameters. 


More so, being responsible in managing and forecasting labour costs play a huge role in seeing you as a strategic leader within your company.



Photo by: destiawan nur agustra | Pexels


Labour Cost Formula 


Calculating your labour cost is pretty direct and easy. In order to get the labour cost in percentage, divide the labour cost by gross sales then multiply by 100. Make sure you include all costs you're paying—bonuses, benefits, commissions, and all taxes. 


Labour Cost Percentage = Total Labour Cost / Total Gross Sales) x 100 



The Driving Force of Labour Cost Increase 


Across all industries, labour costs seem to be dramatically increasing for a myriad of reasons. 


  • The minimum wage in various countries has increased

  • Hourly rate pay for employees has increased by roughly 5% over the past 12 months

  • Mass leaving of people in the workforce



Key Takeaway 


The increased labour costs without any technological modifications that boost productivity can shrink employers' eagerness to hire employees. This is a well-established fact with tailored evidence. This means that any attempt to better-off workers by giving salary increases will reduce the overall labour amount that they will use. If there is less labour, less will be produced. 


Thus, business owners like you, need to act fast and smartly to combat increasing labour costs. Adapt to the latest tools and software that can help you streamline and unify organisation processes, resulting in a robust and more productive workforce. As you do this, make sure you're prepared without compromising your customers, employees, and revenue. 




RosterElf: Rostering Made Easy 


RosterElf's cloud-based rostering software truly is a game-changer. Say goodbye to roster conflicts and chase employees for their availability to work. Employees can easily update their availability to work and notify managers about it through a smartphone app. 


Staff set the times and days they can work and RosterElf does the rest. Our software then automatically suggests available employees fill shifts. 


What are you waiting for? Time to take your rostering and payroll game to the next level and boost your business' performance. Call us now at 1300 353 000 and our team will be more than happy to assist you. 


To get a more clear view of how our app works, enjoy 30-day access to our tool for free!