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Actual versus Theoretical Labor Costs

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Read about punching in and out (and payroll), and labor schedules before you read this post. Both posts have information that will help this article make more sense.
At the end of the week, attendance and times worked will be complied to determine payroll and wages for the usual “work week”. A side-by-side analysis of the actual labor schedule (time and attendance values) and the theoretical labor schedule will show numerous metrics that can be used to manage the staff. This process of comparing the actual schedule against the theoretical labor schedule is generally called “Actual vs Theoretical” or “AvT”. Using an AvT, you can analyze data such as:

  • Which workers consistently show up for their shifts on time? Consistently dependable staff members are valued employees, showing up at work on time, and are the genuine workhorses of the company. Be certain to reward them for their hard work.
  • Which workers are constantly tardy for their shifts? This can cause a labor shortage during shift changes, and can cause disarray among other staff members. These workers may need to experience corrective action to avoid continued habitual lateness.
  • Which workers are constantly early for their shifts? This raises the payroll cost, lowering profit for the company. Preventative actions may be necessary with these staff members for the reduction of your labor costs.
  • Which workers neglect show up for their shifts, or regularly call in? These staff members may need to be informed that they risk being let go, as they are fickle in their work habits and reduce morale for other employees and managers.
  • Which workers are always free when another worker fails to show up? These staff members are willing to come in on their days off , and should be rewarded for their hard work to keep the establishment running.
  • Which positions tend to have higher turnover? Turnover is immensely costly to a business, and pinpointing areas with high turnover is the first step to take to lower turnover and improve the bottom line.
  • Which employees are most tenured? Tenured staff are devoted team members and should be rewarded for their hard work. Every effort should be made to boost the tenure of reliable employees while lowering turnover and raising profits.
  • Which is more expensive, the theoretical or actual schedule? How much difference is there between the two?
    • If the theoretical schedule is costlier, management is over-scheduling the work force and may be letting employees off early without reason. This frequently leads to exasperated workers and much higher turnover , lowering profit for the company.
    • If the actual schedule is costlier, management is not scheduling enough work beforehand, and is then forced to call staff members on their days off. This scenario can also create exasperated workers and higher turnover. It frequently results in gratuitous over-time costs and reduced profit.

The perfect work environment has a 0% AvT ratio , staff members worked when they were scheduled and management precisely identified the establishment’s needs.
Labor, particularly in hospitality and retail industries, is the greatest expense which companies personally control. Analyzing metrics such as Actual vs. Theoretical labor costs gives management the ability to keep control of the business, therefore boosting profit. Very basic metrics can be analyzed manually using Microsoft Excel spreadsheets, but advanced scheduling software such as TimeForge can determine advanced metrics swiftly and smoothly.
Are complicated employee scheduling practices taking up precious time at your business? Are you making the best possible labor schedule? How much turnover is created because of bad or late schedules? Did you know that TimeForge can reduce turnover, improve retention, and increase profits at your business? Sign up today for a no risk free trial!

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