How to Effectively Manage the Cost of Seasonal Employees

The need for hiring temporary labor can be driven by holidays, special projects or even the weather. Hiring seasonal employees can be a cost-effective management strategy for small businesses owners as well as large chain stores and distribution centers. But, just like any business strategy, it’s one that can quickly go sideways if you’re not carefully monitoring it.

That’s why the HR and Finance departments need to work together on this challenge.

Five Questions to Ask before You Start Hiring

1. How many employees do you need to cover your busiest time of year?

If you’re not monitoring year-over-year seasonal hires, you could be taken by surprise. You should also work with finance to determine the sales forecast and base the number of hires on those factors.

2. What is your typical turnover during peak season? Will you be ready to supplement lost labor?

If the turnover rate is high for your seasonal help, think about improving retention with incentive programs. Incentives can include discounts on your services or products, bonuses, or the possibility of being hired for a full-time position. Retaining your best seasonal employees can also help lower your overall labor costs.

3. How do you schedule employees to ensure you have enough people during peak season?

Because contingent workers are different from your full- and part-time employees, in that they often work unplanned schedules, have different benefits plans, have different job classifications, they must be accurately tracked with the best available time tracking tools, otherwise employers can expose themselves to potentially expensive litigation.

4. How much should you spend on your labor during peak season?

Working with finance and your operations department is key here. Seasonal labor spend relies on many factors, and this number really isn’t cut and dry. It’s different for every industry.

5. What is your typical overtime spend? Can you reduce it?

In a healthy company, paying overtime is a necessary tool to mitigate seasonal or other such fluctuations. You and your finance department can work together to determine if paying overtime to your staff is more cost effective than hiring contingent workers.

For some human capital management teams, leaving these questions entirely to finance is much more comfortable, because, let’s face it, there’s enough on HR’s plate already; however, our research shows that CEOs and CFOs value HR the most when they can help reduce labor costs, so this is an area where smart HR teams can have a larger impact on the company’s bottom line. If you feel uncomfortable crunching the numbers with finance, then this is an opportunity to either hire a numbers-focused HR professional or to find software that will help you manage the numbers much better.

A reminder – The HR Center of Excellence is all about helping you modernize your team and show more value to your executives, so you can hire more people and add more software to improve your organization. This area is one where we find that most HR professionals are not as involved in – so this one may be uncomfortable – but that’s ok. It means that you’re pushing yourself and your team out of your comfort zone to help you get closer to a state of excellence.

Looking for more suggestions on how to better manage employee hours and labor expenses across your organization? Visit the HR Center of Excellence Labor Costs Hub.