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Analyzing Metrics: Actual versus Theoretical Labor Costs

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If you’re new to analyzing metrics, read about punching in and out (and payroll) before you read this post. It has information that will help this article make more sense!

At the end of the week, managers compile employee attendance and times worked to determine payroll and wages for the usual “work week.” Analyzing metrics from the actual labor schedule (time and attendance values) and the theoretical labor schedule can help you manage staff. This process of comparing the actual schedule against the theoretical labor schedule is generally called “Actual vs Theoretical” or “AvT”.

Asking questions with Actual vs Theoretical data

Using an AvT, you can analyze data such as:

  • Which workers consistently show up for their shifts on time? Don’t forget to reward your most dependable and valuable employees 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 should also be rewarded for their hard work. Every effort should be made to boost the tenure of reliable employees while lowering turnover and raising profits.

Analyzing metrics related to labor cost

You can also ask questions about labor costs, such as:

  • Which is more expensive, the theoretical or actual schedule? How much difference is there between the two?
    • For example, 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 costs more, management schedules too few workers or shifts beforehand. They then have 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.

What is the ideal AvT?

The perfect work environment has a 0% AvT ratio. Meaning, staff members worked as scheduled and management precisely identified the establishment’s needs. The closer your business can get to a 0% AvT, the better.

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. While you can analyze basic metrics with Microsoft Excel spreadsheets, advanced scheduling software such as TimeForge can determine advanced metrics swiftly and smoothly.

Do complicated employee scheduling practices take up precious time at your business? Are you making the best possible labor schedule? Do bad or late schedules create a lot of turnover for you? 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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