The Biggest Cost of Doing Business: A Closer Look at Labor Costs
Posted on August 7, 2013
As any company leader knows, the biggest cost of doing business is often labor. Labor costs, which can account for as much as 70% of total business costs, include employee wages, benefits and payroll or other related taxes. Labor costs are rising as the economy improves, having an even bigger financial impact on organizations across the US.
The cost of employee benefits, which can account for up to 30% of overall labor costs, are a significant expense as well. These costs are also rising: health care benefits costs alone are expected to increase an average of 7% in 2013, according to the National Business Group on Health.
In the face of rising costs, it’s understandable that companies are looking to reduce their spending. In fact, 76% of senior executives expect to undertake cost-cutting initiatives over the next two years. Many organizations are feeling the pressure to do even more with less—fewer employees, fewer resources and smaller budgets. So what can you do to confront the labor cost issue head-on and find solutions?
Gain better visibility into costs
As the saying goes, “Know your enemy.” Understanding the root of the problem is absolutely necessary to finding a solution. Having an accurate picture of your labor costs allows you to identify trends and pinpoint the issues. For example, let’s say your overtime costs have been unusually high lately. To uncover the root cause, you will need to know when the most overtime hours were being logged, which departments or employees were working overtime and whether a similar peak occurred in the past. Armed with the right data, you will be able to create a strategy to correct the problem.
In addition to solving current issues, having access to labor information allows you to plan for the future. When you have a clear understanding of employee compensation and benefits costs, you can plan better for annual wage increases and additional headcount as your company grows.
A reporting solution like Paycor’s Custom Web Reporting allows you to configure custom reports using only the data you want to see, drilling down into work locations, departments and other details. The application lets you create and analyze compensation, benefits and overtime pay reports in minutes.
Increase organizational efficiency
Once you have a solid understanding of your current labor costs and trends, you’ll probably be looking to reduce them. Here are a few ways to increase overall efficiency and make a positive impact on the bottom line:
* Implement time tracking software to ensure employees are clocking
in and out correctly, reducing time theft and overall labor costs.
* Use a cloud-based time and attendance system to manage employee scheduling from anywhere, enabling real-time labor cost management.
* Opt for an integrated solution for HR, payroll and timekeeping to increase process efficiency and guarantee accurate labor data.
* Put an HRIS in place to streamline administrative processes and free up time for value-added tasks, helping ensure that labor is worth the cost.
Labor costs are rising, and executives are on the lookout for areas where they can reduce spending. The right technology can give you visibility into key labor metrics and help you maximize efficiency, enabling your business to achieve its goals.
Learn more about how Paycor’s technology solutions can help your organization perform better: use our Solution Finder to find the right software solutions for your business.
Sources: Bureau of Labor Statistics, Reuters, National Business Group on Health, Deloitte