Measuring Labor Cost and How it Relates to Increased Productivity
People provide their labor to businesses in exchange for wages, and they trade their unpaid leisure time for paid work time to make a living and to be able to purchase goods and services. Businesses, in turn, use this labor to produce goods and services demanded by consumers.
Economists divide the factors of production into four categories: land, labor, capital, and entrepreneurship.
The second factor of production is labor. Labor is the effort that people contribute to the production of goods and services. Your people are the most important assets in your business. They are also the assets that change most often and require the greatest amount of nurturing and development in order to deliver expected results. Effective workforce optimization depends on the right blend of training, performance standards, technology and motivation.
Types of Labor
Unskilled and Semi-skilled Labor - Unskilled laborers may lack basic skills necessary for satisfactory workplace performance. This means someone in your organization must train them, supervise them closely or provide extensive on-the-job training to ensure work is performed as specified.
Salary & Hourly (Wage Employees) - Salaried and hourly wage labor are those employees whose compensation is in exchange for work done. Do you have an accurate picture of which projects or clients are getting the lion’s share of your employees’ hours? Not likely, unless you’re tracking in real time to see where you’re getting bogged down, where you’re getting the most bang for your buck, and where you might need to allocate more resources.
Contract Labor - Independent contractors, on-demand or self-employed workers, and freelancers are individuals who do work for you but are not your official employees. If you rely on a contractors to get the job done, sometimes you do need to know when they are working and track how many hours they’ve put in. There are several reasons you might want to track how long, when, or even where your virtual team is working:
- If you pay them by the hour, tracking contractor hours ensures you aren’t overpaying.
- If you have contractors who bill by the hour, they need to know their billable hours to invoice accurately.
- Knowing how contractors worked on a project helps you better estimate job costs so you can bid more accurately for similar jobs in the future.
Productivity is the amount of goods and services that the labor force creates. It's measured by how much is produced by a certain amount of labor and of labor and a fixed amount of capital. The more they create, the higher their productivity. Companies seek ways to boost productivity because it increases their profit. High productivity creates a competitive advantage.
Eliminating Calculation Errors increases productivity
When you process accurate time cards, you are better able to forecast your labor costs and plan your job cost more effectively. Keeping Excel spreadsheets or pen-and-paper time sheets is definitely no longer the best way to manage your staff. With an intuitive cloud-based time tracking tool (like ours) you are able to manage employee and contractor job cost and absenteeism on-the-go when needed, and create and process error-free payroll every time.
Understanding Data & Analytics increases productivity
Business analysis is an important part of running any company. Taking a look at your business resources and keeping good records of your employee time not only allows you manage project and job cost, it also allows you to forecast your labor costs better for future work.
Being able to pull up your labor data and analyze it to forecast real-time labor costs gives you a great starting point for planning and optimizing your budget.
Improving punctuality makes a difference, and having a way to monitor employee attendance habits keeps your team honest. It also provides a great way to perform employee reviews and audits. Having clear attendance data at your disposal allows you to plan better as well.
Productivity doesn’t just increase your efficiency. If you do it right, it can also increase your income. True productivity isn’t about getting more things done. It’s about getting the right things done. More income for you means more charity for others, new jobs for others, and new products and services for others.
Let Hour Timesheet help your origination track your labor-force and your productivity today