5 Tips to Reduce Labour Costs

by Deputy Team, 5 minutes read
HOME blog 5 tips to reduce labor costs

Every business starts small. But administrative overhead often grows as organisations scale up.

And if you’re constantly on the defensive trying to solve different issues, how are you supposed to reach the next level?

Read on for five tips to gain control over your profit margins and reduce your labour costs.

1. Provide employees with predictable work schedules

Many employers have discovered the cost-savings and other benefits of providing shift workers with fair and predictable schedules.

Even if you’re not in a jurisdiction requiring these regulations, implementing similar practices in your workplace will likely decrease employee stress, increase employee morale, and significantly save labour costs. Employees have time to plan for transportation, arrange for childcare, and reduce no-show shifts. Here are three tips to implement fair workplace principles into your scheduling practices.

  • Give advance notice. Post employee schedules at least two weeks before publishing them to each employee electronically.

  • Provide ample rest time. Don't schedule employees back-to-back closing and opening shifts without at least 10 hours off between shifts.

  • Reduce schedule changes. Limit schedule changes after the schedule is posted to emergency situations only. Employees should be able to rely on their posted schedule.

2. Reduce pay overages

It’s 11:00 am, and your retail store is bustling. You thought you had enough staff to cover the registers, but now you see that customers on the floor need extra assistance. It’s almost time for a shift change, and one employee asks if you need extra help. You say yes without thinking.

But hindsight is 2020. Later, you’ll review the numbers and realise you must pay a high overtime fee for the weekend. On top of that, the employee doesn’t have enough time to rest between shifts, so you also have to pay an additional penalty in certain jurisdictions.

The easiest way to reduce labour costs is to cut some of these avoidable pay overages. Here are three tips to make it easier.

  • Use stress profiles to alert over time. While stress profiles might make you think of someone’s emotional state, in this case, stress profiles refer to an employee’s schedule. Use automated tools that trigger a warning if an employee is nearing the maximum number of hours a week so you don’t accidentally assign overtime hours.

  • Ensure appropriate rest time between shifts. Some regulations, like Fair Workweek in the US, require employers to provide appropriate time between shifts. In the UK, workers over 18 are entitled to rest breaks. Get it wrong, and you might have to pay a fine. Make compliance easier with a workforce management system that recognizes the requirement for rest between shifts and avoids scheduling anyone in a way that will trigger a penalty.

  • Confidently record accurate timesheets. When you use manual timesheets, adding—or leaving off — hours worked is easy. Time tracking tools with built-in geolocation, timestamps, and record-keeping can help ensure you always have the right hours tracked.

3. Reduce labour costs by optimising schedules

The restaurant and retail industries know this challenge all too well. Either your business schedules too many employees during hours that don’t generate enough sales, or you don’t schedule enough staff to support spikes in customer traffic. Both situations can hurt your business. You either kill your profit margins or hurt the customer experience (i.e. future sales).

  • Gain a better understanding of your business trends. Improving and optimising your schedule relies on having a clear performance baseline. Making informed changes is difficult if you don’t know where you’re starting from. Your workforce management solution should have a dashboard that pulls together your business's most important heartbeat metrics, such as sales, wage costs, and labour percentage. Those insights give you a clear, central report card that surfaces trends across your business daily and over time.

  • Control costs using budgets and scheduling guardrails. Once you know where your staffing levels should be for optimal business performance, you need to enforce it. With weekly hour or wage budget targets set, managers have a visual guide of their schedule compared to goals, allowing them to adjust as they schedule.

  • Make decisions on the go. As they say, time is money. You can’t spend hours glued to your computer to make some staffing decisions. Instead, use a mobile app to schedule — and make changes — from anywhere.

4. Reduce employee turnover and increase productivity

It costs far more to replace an employee than to retain great employees. So take the time to invest in keeping your staff happy. Whether you manage a craft brewery or a large franchise, you’re focused on making a quality product or providing top-notch service. But to do that, you need to attract quality talent, retain those workers, and use emerging technology to empower a smarter workforce.

According to a recent survey of more than 1,400 shift workers, 69% worry about job security. Here are three tips to help your staff feel more secure in their jobs — and to reduce the chances of unwanted employee turnover.

  • Empower your team. Enable your team to swap shifts with other employees in their squad to avoid last-minute no-shows.

  • Give your staff a seat at the table. According to a recent survey, 90% of shift workers feel they contribute to their organization’s success. However, employees can quickly disengage when they don’t feel they have transparency in decision-making. Use your communication app — and turn on read receipts — to have a clear communication record.

  • Make wellness a priority. From mental to physical health, it’s your job to keep employee wellness in check. Happy employees lead to happy customers — and lower employee turnover.

5. Incentivise performance

Bonuses and commission payments are a great way to incentivise employees to always do their best work. Bonus plans should be based on measurable performance metrics. Likewise, commission plans should be based on meeting key sales metrics. When your employees are at their most productive, sales will likely be increased, leading to greater profit margins and greater employee morale -- who doesn’t love the opportunity to earn more money in the form of a bonus or commission payment?

  • Align bonuses with clear outcomes. Review bonus plans and make sure they measurably incentivise performance.

  • Make goals a priority. Review commission plans to ensure that sales metrics and commission payouts are current and aligned with your sales goals.

  • Communicate often. Communicate performance goals to managers and staff to ensure everyone is on the same page about what is required and the incentives.

Reduce turnover — and increase productivity

Whether you manage a craft brewery or a large franchise, you’re focused on making a quality product. And making sales. But to do that, you need to attract quality talent, retain those workers, and use emerging technology to empower a smarter workforce.

Sign up now for a free trial of Deputy to learn how you and your staff can be more productive — and save money along the way.