Answers to your C-suite’s most pressing questions about employee labor 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. Having this access to labor information allows you to plan for the future and help your organization make more informed decisions. Armed with the right data, you can create a strategy to correct the problem and more easily predict when you might need additional staff in the future, which will enable better budget forecasting. From there, you can identify trends and insights into when the most overtime hours were being logged, which departments or employees were working overtime, and whether a similar peak occurred in the past. If your overtime costs have been unusually high lately, uncovering the root cause will depend on having accurate payroll data analytics that are easily accessible. Start by asking questions such as: Are we overspending on labor? Are we underutilizing our workforce? Are we effectively managing overtime? Do we have the right people scheduled at the right times? Are we operating above the average labor cost for our industry? So, what can you do to confront the labor cost issue head-on and find solutions? Gain better visibility into payroll costsĪs the saying goes, “Know your enemy.” Understanding the root of the problem is the way forward to finding a solution. Having an accurate picture of your labor costs gives you the data you need to identify trends and pinpoint the issues. Many organizations are feeling the pressure to do even more with less-fewer employees, fewer resources and smaller budgets. In the face of rising costs and an ongoing struggle to find employees, it’s understandable that companies are considering all manner of ways to reduce their labor spending and total benefits costs. Operating with Fewer Resources and Smaller Budget s Conversations around the cost of benefits are another opportunity for HR leaders to make their voices heard. In Paycor’s State of the American Business survey, 65% of companies said they planned to reevaluate their benefits package in 2021. The cost of employee benefits, which can account for up to 30% of overall labor costs, is a significant expense as well. But herein lies the ideal opportunity for HR to step out of its comfort zone and contribute much-needed value to an area that has historically been owned by finance. Especially these days, attracting top talent, engaging employees and developing them over the course of their careers are always subjects close to the hearts of most HR professionals. Yet, according to a Paycor survey, HR professionals only spend 15% of their time managing the cost of labor. Labor, which can account for as much as 70% of total business costs, include employee wages, benefits, payroll and other related taxes. To do so, a business can reduce the number of employees, cut back on production, require higher levels of productivity, or reduce other factors in production cost.As any company leader knows, one of the biggest costs of doing business is labor. If demand for a product declines, or if competition forces the business to cut prices, the company must reduce the cost of labor to remain profitable. The sales price must include the total costs incurred if any costs are left out of the sales price calculation, the amount of profit is lower than expected. When a manufacturer sets the sales price of a product, the firm takes into account the costs of labor, material, and overhead. If the cost of labor is improperly allocated or evaluated, it can cause the price of goods or services to shift away from their true cost and damage profits.Direct costs include wages for the employees that produce a product, including workers on an assembly line, while indirect costs are associated with support labor, such as employees who maintain factory equipment.Costs of labor can be categorized into two main categories, direct (production) and indirect (non-production) cost of labor.
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