A big opportunity for reducing operating costs and increasing productivity lies in more effective workforce management
BANGALORE, INDIA: Unprecedented economic challenges are driving organizations to find new ways to cut costs and boost productivity. Many have already taken steps to identify the inefficiencies and have worked out ways and means to improve the situation. Unfortunately these changes are not always enough.
Because labor often represents an organization’s s most significant controllable expense, a big opportunity for reducing operating costs and increasing productivity lies in more effective workforce management that help achieve quick bottom-line results.
The following five tips offer ways to manage your workforce more effectively for higher productivity and lower costs — even in these tough economic times.
1.Put systematic controls in place to ensure fair, accurate employee pay.
Without sufficient timekeeping controls, you may be paying your workers too much — or too little. Overpayment eats into profits and underpayment puts you at risk for legal penalties, union grievances, and employee dissatisfaction. Manual timekeeping processes require managers to remember complex pay rules —overtime, government regulations and more — an approach that too often results in payroll errors.
An advanced time and attendance system eliminates costly guesswork by capturing company and regulatory rules up front and automatically applies the rule for consistently accurate pay calculations.
2.Reduce payroll inflations by eliminating “buddy punching”.
Buddy punching is a pervasive problem that no organization can afford to ignore. A recent study found that this widespread practice inflates payroll by 2.2% on average. Multiply that across your employees and buddy punching would inflate payroll by whopping amounts annually.
For an organization with 5000 employees and average salary of 12,000 a month, the payroll inflation would be about 13 lakhs only from buddy punching.
Fortunately, buddy punching can be reduced by using an automated time and attendance solution that verifies the identities of employees punching a time clock. Unlike manual timekeeping practices that are highly vulnerable to abuse, approaches like badge swiping with PIN entry or biometric verification offer higher levels of protection against buddy punching.
3.Shrink administrative overhead with employee self-service.
Handling employees’ administrative queries takes a toll on supervisor and HR manager productivity. Employee self-service solutions enable workers to access their own payroll data, leave information, vacation accruals, and other HR information. Limiting access to self-service functions to specified times —like breaks or off-hours — helps ensure that employee productivity doesn’t suffer.
At the 5000 employee organization, with 1 leave application per employee per month, the time office staff will have to enter 60000 leave entries a year to calculate payroll. This leads to wastage in productive time and therefore loss in productivity. With so many entries this also leads to data entry errors. At a conservative error rate of 2 per cent the loss in payroll can be huge.
4.Gain control over employee absence costs.
Employee absences may be costing your organization much more than you realize. Unplanned absences equal six percent of base payroll on average. According to a 2008 Mercer study, this number represents the total cost of incidental absences, including the indirect costs of replacement labour, which translates to as much as 21 percent of net lost productivity per day.
Absence management systems can help you gain visibility into absenteeism trends and identify workers with problematic attendance patterns. They also automate and enforce vacation, sick and disability policies as well as government and union-mandated leave rules to reduce costs and lower risk of noncompliance.
5. Use Compensatory off/Overtime the right way.
Although compensatory off lets you “flex” your workforce as needed to meet output targets and yet take care of employee work-life balance, it can sometimes mask serious underlying problems. For e.g. compensatory off eligibility and takings are manually managed in almost every organization. This leads to lot of abuse of compensatory off which is a direct bottom-line hit on the organization. At an average if an employee takes 1 day comp off extra, it translates to huge payroll loss for the year.
Let us consider the above example of 5000 employee organization with an average salary of Rs. 12,000. If every employee were to take one day of extra compensatory off, then that would amount to 5000 days of payroll loss which would be approximately Rs. 20 lakhs only due to comp offs.
Companies using overtime struggle with accurate and fair management of overtime also. For example, overtime may be used to make up for production delays caused by faulty equipment or process bottlenecks in a manufacturing unit. Without sufficient insight and controls, managers run the risk of overtime misuse by employees.
Some automated time tracking solutions provide up-to-date reporting that helps managers understand where and how comp off/overtime is being used. These reports let you monitor workforce performance indicators and drill down to determine the root causes so you can take corrective action.
The author is Sales consulting head, India operations, Kronos.