Hidden labour expenses and ineffective labour utilisation - HR Future helps people prepare for the Future of Work and is South Africa's leading print, digital and online Human Resources magazine.

Hidden labour expenses and ineffective labour utilisation


Labour is one of the largest costs for companies, yet many organisations are unaware they are absorbing unnecessary costs and lost productivity that are hidden in complex systems and processes.
Labour-related losses, referred to in the industry as "payroll leakage", are a result of inadequate oversite, undermanaged timekeeping and schedule practices, improperly configured technology, lack of coordinated governance, and gaming of pay policies and schedules. Payroll leakage can account for up to .05 to 2.5 per cent of total annual payroll and labour expenses.

From technology and measurement to policies and design, many organisations are managing timekeeping, labour utilisation, and compensation in a way that is fundamentally outdated. As the makeup of the workforce transforms and new regulations come into play, measuring and monitoring how much is spent on labour can no longer be left as a periodic budget exercise. Today, the right analytics can give an organisation insight into the front-line causes of labour challenges, saving money that can be redirected into strategic initiatives and sustainable objectives.

Today's workforce is made up of employee labour, as well as part-time or contingent workers. Increasing numbers of workers work remotely and capturing actual hours of productivity is difficult. These labour challenges are increasing the potential for missteps in labour spending and utilisation. In fact, only 19 per cent of executives surveyed believe their companies fully understand the labour laws that govern contingent workers.

These insights into the workday help organisations realise labour savings, and help employers and workers alike realise ways they can operate more effectively.

Organisations can analyse their labour resources on a few key factors – labour spending, resource utilisation and missed-revenue opportunity.

The workforce data analysis results in an actionable plan the business can use to achieve savings. These data-driven insights are focused on:
  • Avoiding paid nonproductive time, improving staffing decisions;
  • Eliminating gaming that inflates payable time and the rate of pay;
  • Enhancing customer experience and product quality;
  • Designing scheduling practices with the employee in mind; and
  • Building a case to support large-scale, overdue changes in the organisation, such as updating outdated pay policies, optimising underutilised systems, or consolidating labour decision making.
Labour costs, timekeeping and scheduling have emerged from the back-office world of purely transactional activities to become an invaluable source of financial and operational optimisation. New techniques to crunch the data that is collected about HR, payroll, scheduling and employees, when combined with other details about operations and financial results, can give entirely new ways of looking at labour spending and workforce management. Armed with insightful analytics, workforce management becomes a crucial element in corporate strategy.

We needed to better understand the financial and employee impact of pay policy decisions before implementation.

Sourced from Deloitte Consulting LLP.

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