Think Like a CFO: How to Maximize Your Labor Spend
Think Like a CFO: How to Maximize Your Labor Spend

Think Like a CFO: How to Maximize Your Labor Spend

Human Resource’s top priorities include: finding the right people, getting them to join the team, onboarding, coaching, career development, and keeping everyone engaged and productive. These are areas where HR excels, and, of course, all of those things are profoundly important and necessary to the health of your organization.

But, there’s also a big opportunity for HR professionals to add value to the financial side of the business. Start thinking about how different categories of workers — salaried, variable, seasonal — get paid and how best to maximize that spend. In other words, you need to supplement your HR knowledge and start thinking like your CFO.

Here are some questions to consider:

Are we overspending on labor?

Labor costs are typically the largest expense for a business. Having an accurate picture of your labor costs enables HR to identify trends and pinpoint the issues. Armed with the right data, you can create a strategy to correct the problem. Plus, in addition to solving immediate issues, having access to labor data helps you better plan for the future and reduce expenses.

Are we underutilizing our workforce?

If HR isn’t tapping into the full spectrum of talent in your company, you’re leaving money on the table. By not taking full advantage of your employees’ potential, disengagement and lack of motivation soon follow. This can lead to a dramatic decrease in productivity and high turnover. A solid career development program and clear advancement paths can make a world of difference.

Are we accurately capturing and recording time worked?

According to the American Payroll Association, the average hourly employee “steals” anywhere from 50 minutes to 4.5 hours per week by showing up late, leaving early, or taking long lunches and extended breaks. Almost 75% of businesses in the U.S. are affected by what is known as “time theft.” Cutting down on a few minutes of “stolen” time for each employee can save you thousands of dollars each year. HR can lead the way by championing a time management solution that accurately tracks and manages hours, eliminates duplication errors, and reduces payroll losses.

Are we properly managing overtime?

According to a Paycor survey of more than 30,000 organizations, more than half (53%) of respondents indicated that they had an overtime expense in 2016. If this sounds like your company, you have the opportunity to have a genuine impact on the bottom line. Accurate data can help answer questions like:

  • Should we hire additional employees to offset the higher cost of overtime?
  • Which locations log the most overtime?
  • Which departments experience the most overtime?
  • Which managers have the most overtime?
  • Is there a plan for scheduled versus unscheduled overtime?

With analytics, workforce time capturing software and a partnership with finance, you can help your organization optimize the total spend on your labor.

Are we looking at our labor costs in silos?

The rise of the gig economy is definitely having an impact on estimating labor costs. If you’re not adding non-employee (freelancers, contract workers, consultants) and contingent labor into the labor cost equation, your numbers will be way off. When your labor costs are siloed, you run the risk of potentially misclassifying employees and non-employees, which can result harsh fines if the company is audited. To prevent costly mistakes, you need a system that can automate your pay to help ensure labor compliance.

Companies that integrate disruptive, transformative HR technologies will increase revenue and productivity up to 9% while lowering HR costs by 7%[1]. Your CFO will really like the sound of those statistics, so get disrupting! The best way to start working with finance is to just jump in with both feet and tackle a project together. Here are some “starter” projects to consider:

How to Establish Salary Ranges

How to Fight the Hidden Costs of Unplanned Overtime

How to Effectively Manage the Cost of Seasonal Employees

And if you’re looking for more suggestions on reducing labor expenses across your organization, visit the HR Center of Excellence Labor Costs Hub.


[1] Richard Dobbs, et al., “The Future and How to Survive It,” HBR (Oct. 2015).

More to Discover

2020 Small Business Health Insurance Requirements

2020 Small Business Health Insurance Requirements

Small business owners aren’t insurance experts and they shouldn’t have to be. Many businesses are so small that the folks in charge of evaluating benefits packages are sometimes in the dark about the myriad compliance requirements surrounding health insurance coverage. Even though small businesses that employ fewer than 50 full time employees aren’t legally bound to offer health insurance, many of them offer coverage to improve employee engagement and morale and also to attract the best talent. So, if your company plans to provide health insurance for your employees, it’s important that you understand your choices and the laws around them.If you’re looking to offer health insurance in 2020 you should consider adding these five popular...

SMB

3 Restaurant Problems That Human Resources Can Help Solve

3 Restaurant Problems That Human Resources Can Help Solve

People get into the restaurant business for a lot of reasons but managing complex HR challenges is usually not one of them. As a restaurant owner or operator, you’ve got a lot on your mind - menus, vendors, pricing, and of course keeping your customers well-fed and happy. The problem is, those complex HR challenges - the ones you don’t want to think about it - can become serious problems if you don’t get a handle on them. The good news is, with the right strategy and the right technology, you can dramatically simplify complex HR challenges before they become problems, protect your business, and get back to doing what you love to do. Restaurant PROBLEM #1: SCHEDULING THE WORKFORCE You don’t need us to remind you that restaurant profit...

CFO

The Importance of Non-Financial Incentives

The Importance of Non-Financial Incentives

Employees are motivated by more than money. Finding, recruiting and hiring talented people is just the beginning. Keeping them motivated throughout their careers is another challenge entirely. Ideally, talented people will have such a great work ethic that they’ll stay engaged no matter how they feel. But let’s face it, how we feel influences how we approach our work.Great managers need to become experts at keeping employees engaged—companies with highly engaged employees are more productive, have 21% higher productivity, and staff are more likely to stick around (Gallup). The problem is, though employee engagement is on the rise, it’s still only a minority of the US workforce who are engaged at work. Employee engagement is way more...

Webinar: March 2020 Web Summit - Keynote Session: 5 Ways HR Pros Can Engage the C-Suite Today - 3/4/20 @10:30am ET

Webinar: March 2020 Web Summit - Keynote Session: 5 Ways HR Pros Can Engage the C-Suite Today - 3/4/20 @10:30am ET

How can you balance people strategy with business strategy? Register for this session to learn our 5 step process to building bridges and the tools you need to help align with business leaders, impact the bottom line and get noticed.Speaker: Lori KleimanLori Kleiman is a business expert with more than 25 years of experience advising companies on HR issues. Her background as a human resources professional and consultant gives her unique insight on how HR professionals and executives can work together effectively to achieve business goals. Her programs are designed to provide critical HR updates and best practices to small businesses. In addition, she is has served as adjunct faculty member at a number of Universities.Wednesday, March 4,...