Labor Management Systems: A Comprehensive Guide

Restaurant employees having a team meeting and the text: Labor Management Systems A Comprehensive Guide for Business Owners and Operators.

Table of Contents

Important tips for business owners and operators

In a world where automation and technology dominate the business landscape, labor management systems have become an essential tool for modern-day business owners. These systems help companies optimize their workforce, reduce labor costs, and increase productivity.

But selecting the right labor management system can be an overwhelming experience for business owners and operators.

In this comprehensive guide, we will take an in-depth look at labor management systems to help you understand their features, advantages, and best practices.

In particular, we’ll cover:

  • definition of labor management system (LMS)
  • reasons to invest in LMS, including benefits for both employers and employees
  • basic and advanced features of LMS
  • pricing considerations
  • drawbacks of implementing LMS
  • how to choose the right system for your business size and industry

What is a labor management system?

LMS stands for Labor Management System

A labor management system (LMS) is a software application designed to manage employee records, monitor time and attendance, and schedule work shifts. Another name for it is workforce management (WFM) system.

These systems can range in complexity from very basic (clock in/out at scheduled times) to fully automated schedule creation and enforcement. They replace pen-and-paper time tracking and printed schedules, as well as Excel-based methods.

The best modern labor management systems not only track time but provide data-driven insights that help managers make informed decisions about their workforce, thereby reducing labor costs and improving employee productivity.

By taking advantage of artificial intelligence and machine learning, modern LMS also enables employers to track important KPIs, ensure compliance with labor laws, and forecast labor demand.

(Note: LMS can also stand for “learning management system” or “logistics management system”, depending on the context. Throughout this post, however, we will use LMS to refer only to labor management system.)

Workforce management leads to

Why invest in a labor management system?

Investing in a new software system can be a daunting task. Before starting your research, it’s important to know why other companies have chosen to take the leap. Is it really worth it?

Below are some of the top reasons that companies choose to invest in an LMS:

1. Simplifies time tracking and attendance management

First, it simplifies the process of tracking employee time and attendance, so you don’t have to spend hours manually calculating payroll and overtime pay. This leads to improved accuracy and efficiency in managing payroll, especially around the holidays and busy season.

For example, switching to an LMS can save a manager 15-30 minutes per pay cycle and eliminates errors by 95% thanks to automated checks in the system.

2. Ensures labor law compliance

Second, an LMS helps business owners ensure compliance with labor laws and regulations. Within the LMS, you can set up rules to keep employees from working overtime hours or from taking long breaks.

You can also prevent clopens, as well as changes to the schedule that would require compensating employees (predictability pay).

When paired with a fingerprint time clock, an LMS allows you to enforce the schedule, eliminate buddy punching, and monitor attendance in real time.

3. Reduces labor costs and improves schedule efficiency

Third, a labor management system helps business owners reduce labor costs by optimizing work schedules and automating the scheduling process. This means you can create more efficient shifts and reduce overtime pay, resulting in significant cost savings.

Because it greatly speeds up schedule creation, LMS saves managers hours each week, allowing them to spend more time helping customers or coaching staff.

4. Streamlines communication and eases staff frustrations

Finally, an LMS streamlines communication between management and staff. You can send automatic text notifications to let employees know their shift is coming up, or alert them when there is an open shift they might be interested in.

This not only helps to ensure good service levels but keeps employees happy, too. (More on employee benefits below.)

Sticky notes lead to burnout
In today’s digital world, paper-based scheduling, timekeeping, and time off requests are considered inconvenient and inefficient and are more likely to lead to frustrations and burnout.

Advantages of labor management systems

Below is a summary of some of the main advantages of using a labor management system over traditional methods of scheduling and timekeeping:

  1. Streamlined onboarding process – LMS helps to streamline the onboarding of new employees by automating manual tasks such as creating employee profiles, generating new hire paperwork for signatures, and other documents required for payroll.
  2. Accurate calculations of employee wages – With LMS, employers can accurately calculate employee wages without having to do tedious manual calculations, saving time and resources and preventing human error.
  3. Improved labor efficiency – By analyzing data generated by the system, businesses can identify areas where their workforce is not performing optimally and take corrective actions to improve labor efficiency and productivity.
  4. Reduced administrative costs – Automation features in LMS help reduce administrative costs associated with managing a large workforce as there’s no need for manual paperwork or staff allocation/scheduling processes that require additional manpower or human intervention.
  5. Increased visibility into different aspects of operations – Advanced reporting capabilities within an LMS provide business owners with detailed insights into various aspects of their operations, including staffing requirements, wage calculation methods, overtime rules, etc., giving them greater control over their budgets and operations.
  6. Improved employee engagement – With LMS, employers can track and evaluate their employees’ performance, provide and receive feedback on a regular basis, and create incentives that drive employee engagement and loyalty. This helps to foster a positive work environment for all.

In fact, employee retention is one of the best reasons to invest in a labor management system in 2023. A good system offers several benefits to employees that help keep them engaged and satisfied with work.

Investing in labor pays off
If your business suffers from high rates of employee turnover, investing in a good labor management system can help.

How do labor management systems benefit employees?

Labor management systems benefit employees through increased transparency, convenience, and flexibility when it comes to things like checking the schedule, requesting time off, and trading shifts with coworkers.

Here are a few of the most relevant benefits in 2023:

  1. LMS makes it much easier for employees to stay on top of the schedule without having to call their manager or drive to the workplace. With automatic text notifications, employees can stay informed and never miss a shift. This helps them avoid any lost wages as well as frustration from manual scheduling methods.
  2. Employees can view their timesheets online or via mobile app, which means they no longer need to track down a manager. Because of the transparency of online attendance tracking, there are far fewer errors when it comes time to do payroll, which means employees are paid accurately and on time.
  3. Because LMS includes both scheduling and timekeeping, employees can conveniently request time off, set their availability, or initiate shift trades online or from a mobile device. This gets rid of the need for employees to call or email their manager, which can be a source of stress for both parties.
  4. Modern technology allows LMS to integrate with other services, such as instant pay apps that provide earned wage access to employees. With these apps, employees can access their earned wages before payday, giving them greater financial flexibility and peace of mind – and removing the need for predatory payday loans.

Each of these benefits is important because it gives the employer a competitive edge in the labor market. When job hunting, employees are interested in flexibility more than pay, and an LMS provides several features that appeal to both employers and staff.

Typical features of LMS

Desktop computer showing an online calendar and to-do list in a browser window.
An interactive work calendar or visual scheduling tool is a typical feature of a labor management system.

Labor management systems come with a variety of features that appeal to businesses of different sizes and industries. However, there are some common features that most systems share.

These basic features include:

When it comes to scheduling, systems can range from basic drag-and-drop to quite advanced (fully automated and able to account for labor laws, staffing policies, availability, etc.).

Modern systems typically allow for mobile access, self-service portals, and employee communication tools, as well.

When selecting an LMS, businesses should assess the features of each system and determine which ones best meet their particular needs. When businesses opt for software, whether it’s an LMS, ITSM software, or any other type of software, there are some key factors they should pay attention to. 

Advanced features and functionality

In addition to the basic features, some providers offer more advanced systems that include additional functionality.

For example, predictive analytics allow businesses to anticipate labor demand and plan staffing accordingly. Automated time tracking helps employers keep better track of their employee’s hours and overtime pay, while advanced reporting enables them to track and measure performance against established KPIs.

Examples of advanced features and functionality include:

These features go beyond the traditional time and attendance reporting found in more basic systems and can be invaluable to businesses looking to gain a more detailed view of their workforce.

These features also include important automations that can protect the business from liability.

Drawbacks of implementing LMS

Pros and cons
Although the pros vastly outweigh the cons, it’s important to consider possible barriers to adoption, as well as best practices to find the LMS with the best fit for your business.

Labor management systems can also have some drawbacks, though these are usually due to the business using an LMS that’s not a good fit for their specific industry, size, or geographic region.

For example, depending on the vendor, the initial cost of setting up an LMS may be high, and it may take several months to implement. Also, implementing a labor management system can require a significant amount of time and effort to train employees on its use.

And there is always the risk that an LMS may be vulnerable to security breaches, which could lead to the loss of sensitive data or confidential information.

Finally, there is no guarantee that an LMS will solve all your labor management issues, especially if you have a large workforce distributed in areas with fair workweek legislation. (Though, TimeForge is an exception – it can handle complex labor law compliance.)

In each of these cases, LMS is still a valuable investment and worth the effort, but the choice of LMS/vendor can have an impact on its short and long-term success, which is why it’s important to choose a product that is a good fit for your business (tips on this below).

Cost of implementing LMS

How much does it cost
Cost is a major concern for many employers thinking of switching to a modern LMS.

The cost of implementing a labor management system varies depending on the size and scope of the system.

Generally speaking, larger organizations that require more complex features will pay more for their LMS ($100-$500 per location per month) compared to smaller companies with simpler needs ($50-$100).

However, there are several factors to consider when assessing the total cost of implementation.

For instance, some systems may require additional hardware, software, or customization.

Moreover, the total cost of ownership (TCO) should be taken into account when determining the overall expense of an LMS. This includes any associated costs such as training and maintenance fees.

Overall, investing in an LMS is a smart choice for 2023 as it provides employers with greater visibility into their operations while offering employees a range of benefits. Labor management systems are becoming increasingly common as more businesses realize the benefits they can offer in terms of efficiency, transparency, and employee engagement.

The cost of implementing an LMS is relatively low when compared to the potential returns that it can bring, making it a worthwhile investment for any business – as long as they follow best practices.

Best practices for choosing and implementing LMS

When selecting and implementing an LMS, businesses should follow certain best practices to ensure the effective use of the system.

First, identify the specific challenges you want the LMS to address and define your goals accordingly.

For example, if you want to improve employee performance, then your goal should be to use the system to measure and improve workforce productivity.

Second, evaluate the LMS vendors based on:

  • Available features – does it do everything you need it to do?
  • User-friendliness – is it easy to learn and use?
  • Value for money – will it provide a good return on investment?
  • Customer reviews – what are other people saying about it?
  • Quality of support services – does the helpdesk resolve issues quickly?
  • Integration with existing systems – will it streamline your processes rather than add more work or steps?

For example, if your business includes multiple locations, you’ll want to focus on systems that are designed to scale. Read product reviews by companies the same size or larger than yours and talk to your friends in the industry to get the inside scoop before you make a decision.

image 5
Keep an eye out for negative reviews, especially ones that highlight poor support. This screenshot is from a public review of a major player in the WFM space.

Third, define the roles and responsibilities of the LMS implementation team and clearly communicate the expected outcomes of the system.

This should include:

  • integrating existing systems and processes,
  • training staff on the system’s features, and
  • setting up performance metrics.

If you’re an owner-operator with a small team, the implementation should be pretty straightforward. If you operate a multi-unit chain, you will want to pilot the system at one or two locations first before rolling it out to all stores.

Every business is a little bit different, so the pilot period is very useful for adjusting the implementation process to ensure the rollout is as smooth as possible.

Finally, provide adequate training to your managers to ensure that they can use the system effectively. This is the best way to ensure ROI and gain visibility into the business.

Labor management systems: a necessity for growing businesses

Labor management systems are transforming the way businesses manage their workforce, providing management teams with critical insights that lead to more informed decisions.

The system helps managers to monitor employee performance and reduce labor costs by ensuring resource allocation and scheduling efficiencies. Because of these benefits, LMS today is a necessity for growing businesses.

However, implementing an LMS can be a painful process if your managers don’t understand the benefits of the system, are new to this kind of software, or don’t know how to use it.

To break down these barriers to change, it’s important that the team is well-trained and can see evidence of the system’s effectiveness.

To get the most out of the LMS, businesses need to:

  1. select the right application,
  2. customize it to their specific needs, and
  3. provide adequate training.

As a business owner or operator, it’s crucial to invest in an LMS that will enable your business to manage your workforce effectively. With the right software in place, your business will quickly realize ROI and improved performance.

That’s why it’s important to carefully research various options before investing in an LMS and clearly set objectives that align with the goals of your organization. Once you have identified a suitable system, thoroughly review its features to ensure they are tailored to your business’ needs, and provide training for all users.

With these best practices in place, you can rest assured that your labor management system will help you achieve your workforce management goals.

Additional resources

Share this post


Table of Contents

Want more tips?

Over 30,000 subscribers already benefit from our industry expertise each month.

We're committed to your privacy. TimeForge uses the information you provide to contact you about our relevant content, products, and services. You may unsubscribe from these communications at any time. For more information, see our Terms of Service and Privacy Policy.
TimeForge for Franchisees

Join our industry newsletter for tips & insights

Want to be a labor management pro? Sign up for our newsletter to receive thought leadership, labor management news, and timely insights from industry experts.

We’re committed to your privacy. TimeForge uses the information you provide to contact you about our relevant content, products, and services. You may unsubscribe from these communications at any time. For more information, see our Terms of Service and Privacy Policy.