3 Strategies to Master Your Wage Costs in 2019

Phil Johnson

4 January 2018    |   

Understanding your wage costs from a financial report is a bit like trying to piece back together a fruit smoothie that’s already been blended. Only a fraction of employers ever master their wage costs. Those who do are able to turn what’s viewed as a burden by their competitors into their best competitive advantage. A well trained and engaged workforce is a terrifyingly sharp weapon to take to your competition. The secret to it all is actually highly practical in application. It has been proven through decades of research that links highly engaged workforces to increases in topline revenue. We’ve worked with some of the most successful companies in traditionally low margin industries. Here are three of the most potent strategies you can apply to turn your workforce into your weapon in 2019. (1) Start measuring the future, rather than just reporting the past Financial reports are good if you want to see what happened yesterday. But taking control of wage costs is a long-term game. This means managing all expenses that a company bears for the employment of a staff member. This includes everything from gross salaries and benefits to other legal employer contributions. If you want to improve your future wage cost position, you need to start in advance. Building a conceptual report of your future wage costs works well because changes to the way you manage your workforce can take a long time to flow through. That’s especially true when it comes to agreed rostered hours, employment types, and hiring strategies, which take time to materialise into long term savings. You know what Christmas trade was like for 2018, so what will it look like in 2019 with higher wage costs and new employees? What could you change throughout the year in terms of things like the types of employees you hire and their agreed hours? The difference can be significant. Scenario test your forecasts based on employment type, age, level and test the impact of unforeseen overtime. Software will greatly speed this process up. If you’re only reporting on how well you’ve done, start reporting into the future in 2019. Plan to be successful in the future so you can start moving towards your goals now. (2) Tie up loose ends with a sharp ‘day of operations’ plan A well-run shift feels good, it’s like a hot knife through butter. The perfect win-win-win for business, employee, and customer. For some businesses, this is a random occurrence, but businesses that invest in the success of their workforce replicate this effect on a daily basis. It sounds simple enough: you need the right people in the right place at the right times, and management that leads the charge from the front.   The reality is that planning and execution have many moving parts, which is why the day of operations plan holds key to your long term success. Staff levels should track your schedule, or day of operations plan, like clockwork. Any observed discrepancies should be viewed in light of demand being increased or decreased versus what was expected. At Tanda we we’ve quantified the ‘loose ends’ of a shift to be worth at least 1% of total payroll cost, based on clients who moved off manual timesheets. These represent just the small 1 to 5 minute variances here or there to what was planned, so with larger unexpected variances there can be a much larger than 1% difference between your plan and actual costs. Executing shifts with precision and recording times accurate to the minute is low hanging fruit in 2019.  You can do this by setting goals for the time between trading or production end, and the official shift end, to encourage staff to finish diligently. If the original plan results in success, sticking to the plan guarantees it. Tanda’s Live Wage Tracker lets you see wage costs in real-time and adjust staffing levels to drive profitability (3) Return Managers to the Frontline If you want to sell more, make more, and ultimately do more in 2019, empower your managers to lead from the front. This is an opportunity that most businesses leave on the table. Frontline managers are your managers who lead shifts and teams, and they lead more employees than any other level of management. Remember, frontline staff have direct and measurable impacts on top line revenue and quality — they are the doers of any company. Research shows that the most valuable thing a frontline manager can do is allocate time to lead from the front, yet frontline managers spend more time on administration than on more important things like coaching and training. In 2019, make the admin the exception. Analyse what keeps managers in their office and automate it,  so they can lead the charge from the front. Industrial engineers use the fancy term “task based observation”, but in practice finding out what to automate is as simple as analysing each piece of paper a manager touches and asking, “why?” Tanda’s Live Wage Tracker monitors your wage costs in real time as Tanda’s Award Engine calculates the exact cost of your wages for each minute of the day Master your Wage Costs Mastering your wage costs only takes a few key changes to the way you do business. First, investing in the right software will empower you to accurately forecast the next 12 months and beyond based on both reported data and common scenarios. Workforce success platforms like Tanda eliminate the need to guess how different employment and overtime levels affect revenue. Second, planning ahead and having contingencies ensure that every shift runs well and no resources are wasted. Besides having a sharp “day of operations plan”, preparing for staffing difficulties is possible with features like shift swapping that dramatically reduce no-shows. Third, ensuring that managers have a connection with both the staff and the customers gives you an edge over the competition. A manager that is not stuck in the back office understands concerns from all ends, and makes better decisions as a result. Help your business grow by implementing these three strategies today! Curious to know more about a workforce management system that can help your business get better this 2019? Book your FREE demo with Tanda today.

Understanding your wage costs from a financial report is a bit like trying to piece back together a fruit smoothie that’s already been blended. Only a fraction of employers ever master their wage costs. Those who do are able to turn what’s viewed as a burden by their competitors into their best competitive advantage.

A well trained and engaged workforce is a terrifyingly sharp weapon to take to your competition.

The secret to it all is actually highly practical in application. It has been proven through decades of research that links highly engaged workforces to increases in topline revenue.

We’ve worked with some of the most successful companies in traditionally low margin industries. Here are three of the most potent strategies you can apply to turn your workforce into your weapon in 2019.

(1) Start measuring the future, rather than just reporting the past

Financial reports are good if you want to see what happened yesterday. But taking control of wage costs is a long-term game. This means managing all expenses that a company bears for the employment of a staff member. This includes everything from gross salaries and benefits to other legal employer contributions.

If you want to improve your future wage cost position, you need to start in advance.

Building a conceptual report of your future wage costs works well because changes to the way you manage your workforce can take a long time to flow through. That’s especially true when it comes to agreed rostered hours, employment types, and hiring strategies, which take time to materialise into long term savings.

You know what Christmas trade was like for 2018, so what will it look like in 2019 with higher wage costs and new employees? What could you change throughout the year in terms of things like the types of employees you hire and their agreed hours? The difference can be significant.

Scenario test your forecasts based on employment type, age, level and test the impact of unforeseen overtime. Software will greatly speed this process up. If you’re only reporting on how well you’ve done, start reporting into the future in 2019. Plan to be successful in the future so you can start moving towards your goals now.

(2) Tie up loose ends with a sharp ‘day of operations’ plan

A well-run shift feels good, it’s like a hot knife through butter. The perfect win-win-win for business, employee, and customer.

For some businesses, this is a random occurrence, but businesses that invest in the success of their workforce replicate this effect on a daily basis. It sounds simple enough: you need the right people in the right place at the right times, and management that leads the charge from the front.  

The reality is that planning and execution have many moving parts, which is why the day of operations plan holds key to your long term success.

Staff levels should track your schedule, or day of operations plan, like clockwork. Any observed discrepancies should be viewed in light of demand being increased or decreased versus what was expected.

At Tanda we we’ve quantified the ‘loose ends’ of a shift to be worth at least 1% of total payroll cost, based on clients who moved off manual timesheets. These represent just the small 1 to 5 minute variances here or there to what was planned, so with larger unexpected variances there can be a much larger than 1% difference between your plan and actual costs.

Executing shifts with precision and recording times accurate to the minute is low hanging fruit in 2019.  You can do this by setting goals for the time between trading or production end, and the official shift end, to encourage staff to finish diligently. If the original plan results in success, sticking to the plan guarantees it.

Tanda’s Live Wage Tracker lets you see wage costs in real-time and adjust staffing levels to drive profitability

(3) Return Managers to the Frontline

If you want to sell more, make more, and ultimately do more in 2019, empower your managers to lead from the front. This is an opportunity that most businesses leave on the table.

Frontline managers are your managers who lead shifts and teams, and they lead more employees than any other level of management. Remember, frontline staff have direct and measurable impacts on top line revenue and quality — they are the doers of any company.

Research shows that the most valuable thing a frontline manager can do is allocate time to lead from the front, yet frontline managers spend more time on administration than on more important things like coaching and training.

In 2019, make the admin the exception. Analyse what keeps managers in their office and automate it,  so they can lead the charge from the front. Industrial engineers use the fancy term “task based observation”, but in practice finding out what to automate is as simple as analysing each piece of paper a manager touches and asking, “why?”

Tanda’s Live Wage Tracker monitors your wage costs in real time as Tanda’s Award Engine calculates the exact cost of your wages for each minute of the day

Master your Wage Costs

Mastering your wage costs only takes a few key changes to the way you do business. First, investing in the right software will empower you to accurately forecast the next 12 months and beyond based on both reported data and common scenarios. Workforce success platforms like Tanda eliminate the need to guess how different employment and overtime levels affect revenue.

Second, planning ahead and having contingencies ensure that every shift runs well and no resources are wasted. Besides having a sharp “day of operations plan”, preparing for staffing difficulties is possible with features like shift swapping that dramatically reduce no-shows.

Third, ensuring that managers have a connection with both the staff and the customers gives you an edge over the competition. A manager that is not stuck in the back office understands concerns from all ends, and makes better decisions as a result. Help your business grow by implementing these three strategies today!

Curious to know more about a workforce management system that can help your business get better this 2019? Book your FREE demo with Tanda today.

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How this retailer increased profit by $8.9m from rostering more hours

There has been a lot of speculation on why we are losing retailers so fast. An interesting research piece from the US presented an alternative hypothesis that generalises the issue down to rostering for profit rather than rostering to control costs. For context – If you were given the choice of increasing revenue by 5% or reducing costs by 5% in order to create the most profitable outcome, what would choose? A “back of the hand” calculation would show that reducing costs increases profit more than the equivalent uptick in revenue. Accordingly, most retailers choose option two. This makes sense if you assume the two scenarios are independent of each other, but what if the cost was your employees? This is where the problems arise. For industries like retail, where staff have a direct impact on sales, it’s not as simple of a question as cutting costs to increase profit. In a study led by Professor Marshall Fisher from Wharton, he and his research team constructed a conceptual model from historical data to identify stores within a US-based retail chain that had the highest potential to benefit from increased labour spend. Importantly, the strategy was actually implemented at 168 retail sites over a 26-week period to validate the model, with the retailer electing to implement the strategy further. The result: A near $8.9 million increase in profit of the stores included. The labour cost challenge The challenge in allocating labour budgets lies in the tradeoff between the known immediate payroll cost and the less certain increase in sales that could be achieved with more staff on hand. The researchers point out that retail managers have a tendency to overweigh the decision to reduce the known payroll cost than the less certain increase in sales which could be achieved by allocating additional labour spend. The labour budget death spiral The study highlights the limitation of the most common retail strategy — setting labour budgets as a portion of sales. Fisher points out that this approach creates a circular problem by failing to take into account how store labour spend can positively impact sales, with the worst case leading to a spiraling effect of reduced sales forecasts reducing labour spend which reduces sales further and so on. Quantifying the impact of labour spend on revenue Creating labour budgets that are designed to maximise profit requires retailers to know on a store-by-store basis the correlation between labour-spend and sales. One way to do this is by looking at times when staffing levels deviate from the original schedule. If ten staff were scheduled on a particular day, but on that day only eight turned up, did sales also decrease by the same portion? If not, by how much? If the answer to the above is that sales didn’t decrease at all, the store is likely overstaffed. If there is a measurable impact, the inverse scenario is likely true and the store may be losing sales by being understaffed. This is the same approach used in the study, which found the relationship between random staffing deviations and impacts on sales was statistically significant. Results showed an increase in labour spend pointed to increased sales at varying degrees, depending on known store attributes. Implementing the strategy for profit The study identified stores in a US retail chain which had the highest market potential, making them good candidates for an increased labour spend. The market potential factored in attributes like average basket value and proximity to competitors, which would create scenarios that allow workers to have the highest impact on converting sales. In the study, 168 stores were selected this way, then allocated a 10% increased labour budget over a 26-week period, of which 75% of the increase was actually consumed in practice by the stores. The outcome was a 4.5% increase in revenue at the impacted stores and resulting in a near $8.9 million profit increase. Learning from the strategy The study shows empirically why the common practice of setting labour budgets as a fixed proportion of forecasted revenue is often self-defeating when applied in a retail setting. An opportunity exists to all retailers to leverage this same profit-centric model for defining labour budgets. The data required is available to all retailers however, it may just be a matter of leveraging that information with the right systems. An integrated forecasting strategy that integrates foot traffic, sales, and employee scheduling data is a practical opportunity afforded to retailers of any size to optimise their labour resource allocations. The interesting part is, Fisher’s research is readily available to all retailers who are looking to drift away from the traditional method of fixing labor budget rosters. The next step is to get this method of labour resource allocation battle tested in the Australian markets. Stay tuned. Up next: What is the Contingent Workforce and how can you leverage it in your business?

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Why Live Workforce Data is the Future

In the pursuit of workforce success, business owners and head office level decision makers are the chief scientists, they are tasked with deciding what things can and can’t mix, and prescribing the optimal ratios for profit. The chemists of profit though sit on the front-line of the business, they’re the staff who mix the ingredients and decide if the ingredients fizzle, or create explosive profit. You can prescribe success for many things from the top down in business: “Here’s how you assemble a burger for best eating” “Here’s how you salt the fries for perfect coverage” “Here’s how you order the stock to reduce waste” The one that eludes most businesses is how to pass down the line “Here’s how you create a successful workforce” Here’s the science in practice. The best salesperson I ever worked with was the franchisee of a large electrical retail store. I’ve never heard someone talk with so much passion and authority about the merits of extending the warranty on a toaster. For him, good customer service and the subsequent numbers on the board had a different meaning to other staff. It was obvious for him that the scorecard of numbers on the board spelt life or death of the business. This reflected in his diligence and dedication to customer success. The challenge for him and all other business leaders is how to scale that urgency down to create action on a during shift basis at the front-line. Creating action through scarcity. If the result of selling an extended warranty, coffee or banana bread to each customer was the difference between being ahead of, or behind the curve of success at any given time throughout the day, these seemingly transactional tasks gain new importance. When you track progress during the shift, it becomes more real how scarce and difficult it is to materialise profit, cementing the importance of decisions made on shift. But scarcity besides being a reality of business is what motivates humanity – it’s why you’ve probably visited more landmarks on a short vacation than you’ve ever visited in your own town. The cumulative impact of these daily, during shift actions, is end of period profit. Prescribing Success. Bringing KPI’s into real-time scales the end goal of profit down to daily decision making, prescribing the formula for success. From a day of operations perspective, it’s about scarcity and urgency. Placing importance on the little things that add up to big profit by allowing teams to measure the outcomes of their decision in real time. In this scenario, getting the team out on time or ahead of time for example, no longer just incrementally affects an end of month report. It decides whether you finish your shift ahead of the prescribed success curve or behind – literally. The goal is to let anyone of any level of business knowledge understand how they’re going, and what they can do to improve it at any given time. The road to success is paved with action, and live KPI’s are the precursor to action.   For more details on the Tanda Live Wage Tracker™ visit Tanda.

Industry Insights    |   

Why employees love Tanda’s Workforce Success software

Workplace automation, including the use of artificial intelligence and robotics, is expected to surge in the next three years, according to multinational insurance broker Willis Towers Watson. This development is unsurprising, as automating HR can lead to significant cost savings for your organisation, especially when implemented in managing attendance, eradicating benefit errors, and automating compliance. With the growing demand for advanced technology use, automating HR processes is not an eventuality, it’s a necessity. But streamlining processes and lowering administrative costs is only one side of the coin. Yes, owners, employers, and managers stand to gain a lot from ensuring that the business is ready for the future. But employees, too, are benefiting from workforce technology platforms that not only ensure wages are paid accurately and on time, but also introduce flexibility and increase transparency in the workplace. Employees love Tanda’s workforce success software because it empowers them in more ways than one. Read about how Tanda is making a difference in workplaces around the world. Error-free Timesheets and Pay Runs The first and most obvious benefit of workforce technology platforms is error-free timesheets and accurate pay runs. Companies that still use manual methods for timekeeping and pay calculation can cause employees to second guess if they’re really getting paid the right amount every time the payslip arrives. In fact, Australia recently had a spate of wage theft accusations, leaving in its wake damaged reputations and millions in back wages. Owners and managers commonly cite a lack of understanding of Australia’s complex award system as the reason it happens. Read more: Taking Back Time: Solving the enduring wage theft problem in Australia Switching to the Tanda employee time clock app ensures staff that their shifts are recorded accurately throughout the pay period. Timesheets are processed with Tanda’s award interpreter, to account for modern awards of Fair Work Australia as well as other enterprise award agreements. This is then exported in a format compatible with a host of payroll integrations, making pay runs quick and reliable. This increases the level of trust and transparency between employers and employees, which in turn increase productivity and engagement in the long run. Better Work-Life Balance When employees have a healthy work-life balance, they become more fulfilled with their work, and more invested in the future of the company. There are a number of ways flexibility can be introduced into a company without hurting the bottom line. For instance, Tanda’s unavailability calendar feature lets employees tell their managers whenever they might not be open for shifts. This helps the company create rosters around each person’s unavailability. Another feature, leave management, optimises the leave request process and lets staff file requests via the web browser or employee app. For some companies, more novel solutions like shift swapping are providing employees with more options to achieve better work-life balance. It allows shift workers to trade shifts with one another when the need arises. This lets shift workers strike a balance between their personal commitments and work responsibilities. Tanda’s shift swapping feature that integrates into its time and attendance web and mobile apps. It lets staff request to drop or cover a shift right from their mobile phone, making it easy for them to start the swapping process. Read more: Achieving Workforce Success: Shift Swapping for Managers Reliable Rostering and Communication Employees need to know their schedule well ahead of time so that they can plan their upcoming week. Tanda’s web-based rostering software cuts down the time companies spend making the weekly roster. Cognitive Rosters® can be connected to your existing roster templates for the predictive suggestion of staffing requirements. Once approved, Tanda sends the roster to staff via SMS, email, or employee app. Employees can then inform their manager of any leave requests or else apply for a swap, dramatically reducing the chances of unfilled shifts throughout the week. Proper rostering is extremely important because overstretched employees aren’t productive. Too few staff on a given shift affects how they engage customers and respond to demands. Tanda’s Predictive Workforce feature uses sales data from the business’ Point-of-Sale (POS) to give an accurate forecast on how many people are needed on any given shift. During the day, Live Insights can be used to make key decisions on whether to call more people in, ensuring that the high quality of operation is sustained and uninterrupted. Read more: Introducing Live Insights: Using real-time staffing to secure your business Transparent and Engaging Workplace According to a survey done by Interaction Associates, 86% of employees say that they are more productive if they trust their employers. A separate study by advocacy group Trust Across America found that trustworthy companies outperform companies in the Standard & Poor’s (S&P) 500 Index. Building that kind of game-changing trust starts with transparency within the organisation. Employees must know that their company is working in the interests of all and they are open about the information that matters to them. With a world-class workforce success software like Tanda, employees have access to a portal that lets them know their time and attendance records, time off allowances, and upcoming shift schedules. It also increases employee engagement in other ways, like clocking in by taking a selfie on the Tanda Time Clock. Starting the workday with a smile can change the employee’s whole perspective, which can lead to a better rapport with customers and fellow coworkers. And with Tanda doing most of the admin work, employees have more time to do the things that matter to them. Read more: Crafting Workforce Success at Windsor Alehouse Why Workforce Software Matters For the modern employee to do their best at work, they need to feel that the company is supporting them and is willing to adjust to their needs from time to time. They need to know that the company they’re working for pays them correctly, supports their life commitments, and effectively communicates with them at all times. Companies can make all this happen by moving on from outdated processes that bogs down human resource management. By using workforce management software, employees are more motivated to work, empowered by a platform that allows companies to drive trust, engagement, and the ultimate employee experience. Ready to find out what Tanda can do for your business? Book a demo today.

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About the author

Phil Johnson

Partner Manager: Having used Tanda in a management capacity prior to working at Tanda, Phil understands first hand the value that Tanda can bring to a business. Phil now manages Tanda's Partner Program, to assist businesses to implement innovative solutions and processes in their business.

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How this retailer increased profit by $8.9m from rostering more hours

There has been a lot of speculation on why we are losing retailers so fast. An interesting research piece from the US presented an alternative hypothesis that generalises the issue down to rostering for profit rather than rostering to control costs. For context – If you were given the choice of increasing revenue by 5% […]

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In the pursuit of workforce success, business owners and head office level decision makers are the chief scientists, they are tasked with deciding what things can and can’t mix, and prescribing the optimal ratios for profit. The chemists of profit though sit on the front-line of the business, they’re the staff who mix the ingredients […]

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Workplace automation, including the use of artificial intelligence and robotics, is expected to surge in the next three years, according to multinational insurance broker Willis Towers Watson. This development is unsurprising, as automating HR can lead to significant cost savings for your organisation, especially when implemented in managing attendance, eradicating benefit errors, and automating compliance. […]

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