Utilize the Allegiance Staffing Employee Cost Calculator
February 9, 2022 | Staffing Blog
When we work with companies to support the labor force in their industry, one of the most important questions we ask is whether they understand the actual cost of their employee labor.
Determining the cost of labor is not as simple as adding up each employee’s salary and benefits — many other elements factor into determining the true cost of maintaining a productive workforce.
This is why it’s important to utilize a tool such as the Employee Cost Calculator offered by Allegiance Staffing to total standard labor and hidden costs, which can quickly eat into profitability.
After identifying your total cost, you will be positioned to take the appropriate steps to optimize your labor force and improve profitability. Let’s take a look at how this all works.
Hidden Costs To Plug into an Employee Cost Calculator
When we work with clients, we spend a lot of time and effort looking for hidden costs in your labor force. That’s why we created a calculator to help you get started on the process. Here’s a few examples of what we’re looking for:
1. Over-staffing. You have too many employees, and they’re not producing enough to justify the cost of retaining a bloated workforce.
2. Under-staffing. You have too few employees, and they’re being over-worked to the point where they are losing productivity.
3. Incorrect pay rate. If you underpay employees or temporary workers compared to the market rate, then you can expect that productivity will suffer over time. Make sure your pay rate is comparable with the market rate to attract qualified candidates for your positions that will help increase productivity.
4. Unscheduled Overtime. Are you incurring unnecessary payroll costs because your staff constantly has to work overtime to get the job done? This points to a lack of labor optimization because you don’t have the right labor fit.
5. Cost of Re-work. Your labor force is not trained, equipped, or motivated to perform at a high level, which means they constantly have to re-do their work. This cost of doing the same job twice will quickly add up.
6. Cost of Scrap. The old adage is to measure twice and cut once. If you don’t have the right labor force doing the right job in the right way, you will inevitably incur increased material costs from scrapping materials and re-doing jobs.
7. Cost of Client Penalties. Some of your clients may have specific requirements for when they need a finished product from your company. If your company’s productivity declines or your labor force is constantly re-working the job, this will inevitably lead to delays. The cost of a penalty from your client will impact your bottom line (e.g., a reduction in payment due to your company’s inability to satisfy the terms of an agreement).
All of these hidden costs need to be factored into your calculation of total labor cost. This way, you can see what needs to change and where you can find areas of improvement. Then, you’ll be positioned to maximize the capabilities of your labor force to increase productivity, reduce costs, and increase profitability.
What To Do With The Results of Your Total Labor Calculation
After you plug in the information in our Employee Cost Calculator, you will be given some important measurements. Two results that we want to draw your attention to include:
- Effective Bill Rate
- Total Savings Potential
– Effective Bill Rate: The effective bill rate will likely be significantly higher than the actual amount that you pay each employee or temporary worker. This will help you see the impact of hidden costs on your utilization of each worker.
It should alert you that you might be paying $10 or $12 per hour for certain talent, but if you factor in the hidden costs of under or over-staffing, unscheduled overtime, scrap and re-work, and other factors that we identified, then the actual cost could be double that amount.
– Total Savings Potential: We also provide you with a figure that captures the savings potential for your company if your workforce were optimized.
What if you had a right-size labor force, paid the market rate to workers, and reduced unscheduled overtime, re-work, and scrap? There could be thousands or millions of dollars of untapped savings.
The calculation can help you identify primary areas of concern and the steps that you can take to start realizing your savings potential. We can help by scheduling a consultation to discuss what you discovered using our calculator.
Talk to Allegiance Staffing About Optimizing Your Labor Force
Our team of experts can provide you with a more detailed analysis of your potential savings through labor optimization. We have helped numerous companies improve their workforce and realize the cost benefits through our strategic approach. (Check out these case studies capturing the results.)
Once we identify a labor solution, we can support your company through temporary staffing. We are one of the leading U.S. staffing companies because we follow a rigorous process to identify talent and place talent in your company.
We encourage you to contact our team of experts today to discuss the results of your Employee Cost Calculator so that we can help optimize your labor force!