“If you cannot measure it, you cannot improve it.” – Lord Kelvin, 19th Century Scientist.
Employee scheduling is integral to running a successful retail and service business. It helps to ensure that the right staff are in the right place at the right time to meet customer demands. To effectively manage staff scheduling, retailers should track six key scheduling metrics: labor costs percentage, attendance rate, overtime rate, turnover rate, revenue per employee, and human capital ROI. By monitoring these metrics regularly, retailers and service sector businesses can gain insight into how scheduling decisions are impacting the business and make adjustments accordingly.
Why is Staff Scheduling Important to businesses?
A Staff Schedule is a management tool that lists and displays the dates and times that each employee in a business is slated to work during a particular period. Schedules help plan and manage employee routines that optimize employee work and store performance. In addition, staff schedules simplify shift planning and reduce employee uncertainty.
Staff Schedules create order and flow that allows employees to focus on their duties and manage break entitlements. Scheduling is vital to the success of retail and service sector businesses because the process ensure operational efficiency, customer satisfaction, and organizational productivity. Consequently, scheduling is one of the most critical staff management functions a retail store manager can undertake. At TimeWellScheduled, we realize the importance of scheduling. Hence, our cloud-based scheduling software can help manage your workforce’s performance and optimize labor costs. Click here to learn more.
Key Employee Scheduling Metrics
l) Labor Costs Percentage
The cost of labor is the sum of all wages employees receive and the cost of employee benefits and payroll taxes paid by an employer. The labor cost percentage measures how much a business spends on labor to produce revenue. 20 to 35 percent of gross sales is considered an average-to-good labor cost percentage. Higher percentages are indicative of low productivity or a shortage of labor. Whereas an extremely low labor cost percentage could indicate surplus labor.
Labor cost percentage = ( total labor cost / gross sales) x 100.
There are many variables that impact total labor cost percentage for retail and service businesses. For example, the unit labor cost, location, and the number of employees. The type of work, and the hourly wage rates also affect the total labor cost percentage. Thus, this metric helps managers budget the number of labor hours available based the average-to-good labor cost percentage.
ll) Employee Absenteeism Rate
The attendance rate shows the ratio of absences to work days during a scheduling period, such as a month, quarter, or year. Absenteeism occurs when employees miss work without managerial approval, for example, a sick day. Employees who request time off from work in advance for personal or vacation leave are typically not considered absent. Employee attendance and punctuality are vital attributes because failure to do so detrimentally affects employee morale and productivity.
Absenteeism rate = number of absences / number of work days
Absenteeism can disrupt operations when it becomes excessive. For instance, employee absences can effect organizational productivity, customer satisfaction, and lead to a decline in organizational morale. So, from a staff scheduling perspective, this metric provides managers with an indication of which employees are reliable and unreliable. Managers can reduce or limit the number of scheduled labor hours allocated to employees with high absentee rates.
lll) Overtime Rate
The overtime (OT) rate calculates the ratio between employee overtime versus regular hours during a specified pay period. Even if the work is planned or scheduled, it can still be considered overtime if it exceeds the standard workweek in that jurisdiction.
In the United States, as per Occupational Safety and Health Administration (OSHA), legislation requires employers to pay a wage of 1 1/2 times an employee’s normal pay rate after that employee has completed 40 hours of work for workers 16 and over. Weekend or night work does not apply for overtime pay unless it is over the mandated 40 hours.
A high overtime rate often indicates a temporary or permanently high workload. However, over the long term, high levels of OT could increase employee illness, injury, labor costs, and overall lower productivity. Thus, an excessive overtime rate means the business should consider hiring more staff to help deal with the high workload.
regular rate of pay x 1.5 x overtime hours worked
Regularly scheduled overtime is costly and may be a sign low of employee productivity, understaffing or poor management, wherein overtime is required for work to get caught up.
lV) Turnover Rate
Turnover is the rate employees move in and out of a company. Turnover is a problem for businesses because it can lead to lost productivity, high recruitment and training costs, and decreased morale among remaining employees. And finally, high turnover rates can negatively affect businesses, making attracting and retaining top talent easier.
Annual turnover rate = (# Staff on 01/01 / # Staff on 12/31) x 100
Employees who are exposed to schedule instability are more likely to voluntarily leave their jobs. For example, the turnover rate for staff members exposed to 3 or more just-in-time (JIT) scheduling practices are 50% more likely to quit their jobs compared to employees who have stable schedules. When an employer is experiencing high levels of turnover, it may be because scheduling practices are unstable or inconsistent. Managers should approach employees and have a no-judgement meeting to establish what the problem is.
V) Revenue Per Employee (RPE)
Revenue per employee (RPE) is a human resources metric that estimates how much money each employee generates for the company. RPE is a meaningful analytical tool that measures how effectively a company utilizes its employees. Companies want the highest revenue ratio per employee possible because a higher ratio indicates greater productivity.
Revenue per employee = Revenue / Current # of employees
The RPE ratio gauges how much money each employee generates for the company. This metric can help managers identify high performers and schedule them during key shifts to ensure their talent is effectively utilized.
VI) Human Capital Return on Investment (HCROI)
Human capital ROI (HCROI) is a metric that measures the dollar value employees contribute to the business relative to the resources employers spend on them, including compensations, benefits, and training. The Human capital ROI ratio metric shows management if they have too many employees for the revenue capacity.
(Step 1) Non-Human Capital Expenses = Operating Expenses – Human Capital Expenses
(Step 2) Human Capital Expenses = Fixed compensation(salaries) + Variable compensation + Benefits + Indirect cost
(Step 3) HCROI = (Net Benefit – cost) / Cost
Retail and Service sector managers can use the HCROI metric in combination with other measures to evaluate individual employee contributions to the organization. From a scheduling perspective, the HCROI can determine if employee scheduling practice are producing results over the medium to long-term. The following are the scheduling questions managers can answer using HCROI:
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How is the company’s employee productivity? Is it higher than competitors?
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Is employee productivity increasing, decreasing or static?
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How is the company performing versus competitors?
“The goal is to turn data into information, and information into insight.” –Carly Fiorina, Politician and former CEO of HP.
Creating an effective staff scheduling strategy is essential to the retail and service industry’s success. Companies should actively monitor critical metrics such as labor costs, attendance rate, overtime rate, employee satisfaction, and more to gain insight into their schedule’s performance. By understanding how their actions translate into results and adjusting accordingly, retailers can ensure that the right staff are in the right place at the right time to meet customer demands and maximize profits.
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