To manage labor budgets for field teams, you should account for the full cost of distributed teams and forecast labor demand across time zones. You should also measure productivity without micromanaging remote employees and establish clear rules for tracking hours and project costs.
SurveyMonkey reports that 75% of Americans currently have a fully on-site work arrangement, 15% are working completely remote, and 10% have a hybrid work arrangement. The reality is that ever since the pandemic happened, remote work has become more mainstream, and now, we see more field teams deployed.
Managing these teams can be challenging, though, especially when it comes to labor budgets.
What Is the Formula for Labor Cost?
The formula for labor cost can show you how much you're spending on employees to produce goods or deliver services.
The basic formula is: Total labor cost = Direct wages + indirect labor costs + employee-related expenses.
Direct wages include:
- Hourly pay
- Salaries
- Overtime
- Commissions
Indirect labor costs include:
- Payroll taxes
- Health insurance
- Retirement contributions
- Workers' compensation
- Paid leave
- Other benefits
If you want to calculate labor cost as a percentage of your revenue, then divide it by your total revenue and multiply it by 100.
What Do You Need To Know About Managing Labor Budgets for Remote Work Crews?
Perhaps you've calculated your labor cost, and it's on the high side. These are the ways you can perform better labor cost management.
Account for the Full Cost of Distributed Teams
Remote workforce management goes beyond tracking salaries and hours. You also have to account for:
- Equipment
- Software licenses
- Cybersecurity tools
- Internet stipends
- Collaboration platforms
- Home-office allowances
In addition, you have recurring expenses on top of one-offs.
The best way to account for all of these costs is to map them out. That way, managers can understand the actual cost of maintaining each remote function.
Review these expenses on a quarterly basis so you can eliminate inefficient spending or duplicated tools. This is also a great chance to see if there are changing operational requirements, and if there are, you can make proper accommodations.
Forecast Labor Demand Across Time Zones
It's common for remote teams to work across different time zones, so labor planning can be complex. For example, you might need customer support during extended operating hours or specialized workers to cover certain project stages.
To alleviate stress in this area, you should build forecasts around expected deliverables and project deadlines. The next step is to map each employee's availability against the required coverage window.
Don't just assume that a remote team can provide round-the-clock service just because they live in different locations. It's best to use the workload forecasts to plan appropriately.
Measure Productivity Without Micromanaging Remote Employees
When you can't physically see your workers, it can be nerve-wracking, but resist the urge to micromanage with things like keystrokes and screen activity. The better move for job site accountability is to establish measurable expectations, such as completed deliverables and project milestones.
Make sure you account for differences in task complexity, too. For instance, 10 simple support tickets aren't equivalent to 10 complicated technical cases.
If you want to change staffing plans or set new targets, discuss these with your employees first. Not only will this give you more useful information for future budgeting, but it'll also help your workers maintain autonomy.
Establish Clear Rules for Tracking Hours and Project Costs
Accurate time and project tracking are especially crucial for remote work, especially when your employees deal with multiple clients and departments. That's why it's essential to set clear expectations for recording work hours and documenting approved overtime or schedule changes.
For mobile time tracking and mobile clock-in systems, consider TimeTrak employee time tracking. With a consistent system, your employees can submit time records asynchronously, and your payroll data will be more accurate.
It's also important to compare budgeted hours with actual hours throughout the project. If you notice that a task keeps exceeding its estimate, then examine it further. You might find that the scope has expanded or dependencies are causing delays, and this can help with future project pricing and resource allocation.
Frequently Asked Questions
What Are the 7 Types of Budgeting?
It makes sense for different businesses to use various types of budgeting, and knowing them can help immensely. They are:
- Incremental: Use the previous period's budget as a starting point and adjust for expected changes
- Zero-based: Managers justify every expense
- Activity-based: Estimates spending based on the activities and resources needed to achieve specific goals
- Value proposition: Evaluates whether each expense delivers sufficient business value to justify it
- Flexible: Adjusts planned spending according to changes in activity levels, production, or revenue
- Rolling: Continuously extends the planning period by adding new months or quarters as earlier ones end
- Cash flow: Forecasts when money will enter and leave the business
What Are Some Strategies for Reducing Labor Costs?
To reduce labor costs effectively, you have to improve how work gets done without compromising service quality and employee well-being. The best place to start is with payroll, as you can find things like overtime patterns and underused capacity.
In addition, you can cross-train your employees. This can help cover absences and shifting workloads. You can further cut down on work by automating repetitive administrative tasks.
What Is Not Recommended to Reduce Labor Costs?
There are some methods of reducing labor costs that may seem effective, but ultimately, they damage productivity, employee retention, and business performance. You shouldn't do the following:
- Make indiscriminate staffing cuts
- Cut training budgets indiscriminately
- Reduce wages or benefits without considering market conditions
- Routinely rely on excessive overtime
- Pressure employees to work unpaid hours
- Misclassify employees as independent contractors
Make sure you always comply with employment contracts and relevant labor regulations. If you try to cut corners, you may face legal and financial exposure.
Keep Your Labor Budget for Field Teams in Check
Working with field teams introduces new elements into running your business, and it can get complicated quickly if you don't start with established operations. When you know how to calculate and manage your labor budget, you can simplify things and keep your business running smoothly.
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