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Trusted Brand Reviews brings you expert insights to guide your payroll processes and human resource management. Discover practical strategies to optimize these systems through HRIS and software automation, freeing up time and resources and boosting productivity.
Hr function5 HR Considerations When Converting a Contractor to Full-Time EmployeeThe decision to convert a contractor to an employee can be daunting for a business, as the process of onboarding and managing a new employee shouldn't be taken lightly. Having someone as a contractor often means fewer responsibilities for the business, yet there are some risks associated with employee misclassification that can land an employer in hot water.
Still, for businesses that have worked with a contractor over an extended period of time and are satisfied with their work, the decision to convert them to a full-time employee may be beneficial. To avoid possible misclassification issues, businesses should ideally make the conversion within a year of working with the contractor. We'll look into the 5 most important considerations to take if you want to convert a freelancer or contractor to an employee.
1. Amount Of Work
Probably the most important consideration to take when considering a contractor-to-employee conversion is the amount of work the contractor has been doing for the business. If their work is consistent and similar to that of a full-time employee, it may make sense to convert them into an employee role. This can streamline the workflow and make all processes easier for the business, in addition to potentially reducing costs, even though they'll be entitled to overtime compensation.
2. Compensation
If you're considering converting a contractor to an employee, it's important to calculate the cost-effectiveness of the decision and consider the potential expenses. While an independent contractor's hourly rate is typically higher than an employee's, one should also calculate the taxes and employee benefits that come with bringing in a full-time employee.
Namely, contractors pay taxes themselves, but employees' taxes are paid by the employer. Moreover, bringing a full-time employee to the team means more than just a fixed salary—it also requires paying for employee benefits like health insurance, paid time off, or retirement plan benefits.
» Which taxes should employers pay? Learn about income tax vs. payroll tax
3. Benefits and Vacation
As we briefly mentioned above, an important consideration when converting a contractor to an employee is the benefits package they'll receive. Not only should you consider the cost of providing health insurance and vacation time to the employee but also how these benefits can help attract and retain top talent. As a business owner, you should see these benefits less as an upfront cost and more as a smart investment in reaching your recruitment goals. In fact, having a solid package of benefits and paid time off might have a bigger impact on a contractor's motivation to become an employee than the salary they'll receive.
So, let's take a look at all the benefits a full-time employee can receive:
Health insurance, including dental, life, and vision benefitsA yearly paid vacation & paid time offA dedicated retirement plan & savingsPerformance bonusesProfessional development benefitsSocial benefits like team-building outings and holiday parties
» Managing employee benefits: set up an effective absence & leave program
4. Training and Supervision
When hiring an employee, you'll need to provide more training and supervision than you would with a freelancer. Usually, companies have a limited ability to train independent contractors, as they're often expected to “hit the ground running” in terms of their knowledge and experience. But for full-time employees, you should be able to provide more intensive training and guidance. Of course, this might be a bit tedious in the short term, but making this part of the business' talent acquisition strategy will greatly benefit the business in terms of increased productivity and efficiency. This will ensure a good long-term relationship between the employer and the worker and ensure a pleasant work environment.
» Is workplace culture important? See why it matters and how to improve it
5. Tax Status
As you probably already know, independent contractors are alone responsible for their taxes. This is important to consider when deciding whether to convert a contractor to an employee. In most countries, becoming a full-time employee means becoming liable for taxes, as the employer will be responsible for paying them instead of the worker. Thus, the tax status should be discussed with a tax expert to ensure tax and payroll compliance and avoid any issues in the future.
When calculating costs, the employer should consider taxes and other overhead expenses, including:
The employer-paid portion of payroll taxesTravel-related expenses and similar reimbursementsTraining costsCosts related to equipment and technology investments
Regarding the legal aspect of differentiating independent contractors from employees, business owners should remember there are multiple legal papers and forms that should be filled out, including:
Income tax formsPayroll taxesLabor standards documents
Bottom Line
When converting a contractor to an employee, there are several considerations to take, including the costs of providing benefits, training and supervision requirements, and compliance with relevant local laws in your jurisdiction. While the entire process might seem tedious, there are many ways to streamline it.
That being said, many modern businesses recognize the value of using a payroll software solution to avoid all the stressful paperwork that comes with ensuring compliance with local tax laws. Adopting an automated payroll solution can simplify the process of transitioning a contractor to an employee, saving you money and time in the long run.
» Want to simplify turning contractors into employees? Read TBR's payroll software reviews to find a solution that will help you along the way.
Hr functionHow Efficient Employee Onboarding & Offboarding Increases ProductivityEmployee onboarding and offboarding are two very important processes in the workplace that can make a world of difference when done correctly. Companies that fail to understand the value of integrating and parting with employees in an efficient and pleasant manner usually suffer from decreased productivity, morale, and engagement.
In simple terms, proper onboarding can help new employees quickly become much more productive members of the team, allowing them to start achieving results as soon as possible. Similarly, offboarding can help ensure that employees leaving the organization do so on a positive note and with all of their obligations fulfilled.
» Should onboarding be in your talent acquisition strategy? See what role it plays
Employee Onboarding
Employee onboarding is the process of introducing new employees to their roles within an organization that usually involves communicating the company’s culture, providing job-specific training, and introducing them to their coworkers. The goal of onboarding is to help new employees transition smoothly into their roles so they can start contributing to the company’s success as soon as possible.
Although every company has a different way of integrating new employees into the workplace, there are five crucial steps every organization must take to ensure the onboarding process is going as smoothly and efficiently as possible. These include the following:
Clearly define the onboarding process: Having verified new employee information, the first step is to document the onboarding process in writing in the form of a detailed job description and an overview of the new employee’s tasks and responsibilities. Establish a timeline: It's important to establish a timeline for the onboarding process that includes targeted milestones and deadlines to ensure the new employee is up to speed as soon as possible. Introduce the new employee to existing staff: Introducing the new hire to existing staff as soon as possible will help them feel welcome and allow them to get up to speed with the team. Provide job-specific training: A comprehensive job-specific training for the new hire should include an overview of their duties and responsibilities, as well as any software or hardware they'll need to be familiar with.Monitor and track progress: During the onboarding process, it's important to track the new employee’s progress and provide regular feedback to help identify any gaps in knowledge that need to be addressed. This forms part of your efforts to manage your workforce as effectively as possible.
Although onboarding processes aren't limited to these five steps and can be tailored to fit the needs of each organization, these best practices will ensure new employees are integrated into the team as quickly and efficiently as possible.
Benefits of a Positive Employee Onboarding Experience
A positive employee onboarding experience almost always leads to drastically increased productivity and engagement in the workplace. If the onboarding process is successful, it can:
Shorten the adjustment and learning period: Onboarding helps new employees quickly learn their duties and responsibilities, leading to increased productivity. Ensure compliance: A well-structured onboarding process can help ensure employees have a clear understanding of the company’s processes and regulations, leading to fewer errors and compliance issues. Improve communication: Introducing new employees to their colleagues can help foster better communication and collaboration between teams, bringing better results for the company. Boost engagement: A positive onboarding experience can increase employee engagement by making them feel welcome and supported. This will make them more likely to stay with the company and work hard to achieve their goals. Streamline performance tracking: Onboarding can help streamline performance tracking by giving new hires clear objectives and expectations so that employers can monitor their progress and provide feedback.Enhance job satisfaction and retention rates: Finally, a well-structured onboarding process can help improve job satisfaction and increase employee retention rates. When new hires feel their employer has invested in their success from day one, they're more likely to stay with the company in the long run and become high-performing employees.
» Managing high performers: see our tips on how to do it
Employee Offboarding
The employee offboarding process is more commonly neglected by organizations, even though it's just as important to part with employees in a friendly manner as it is to welcome them. Employee offboarding is defined as the process of transitioning an employee out of their role within the company with minimal disruption to the team.
Like integrating, separating from employees has a few best practices that can make the process much smoother for all parties involved. These include doing the following:
Make sure the employee understands their rights: Before the offboarding process begins, make sure employees are aware of any entitlements they may have, such as severance pay, health insurance, employee benefits, and even stock options.Document the separation: Ensure that all details of the separation process are properly documented and that all paperwork is filed correctly.Offer support: Do your best to provide outplacement resources to ensure the employee’s transition is successful.Ensure a smooth handover: Prior to the employee’s departure, make sure all duties and responsibilities are properly assigned to another team member. Make a positive impression: Finally, make sure that employees leave with a positive impression of their time in the organization.
Benefits of a Positive Employee Offboarding Experience
Doing your best to create a positive offboarding experience for employees can help to:
Streamline the transition: A proper offboarding process can ensure all necessary tasks are completed and the transition is smooth for everyone involved. Avoid security risks: If your employees leave on a positive note, they're less likely to share confidential information or sabotage the company in any way.Get constructive feedback: Employees leaving the organization can provide valuable insight into their experience with the company, which can help inform better decision-making in the future. Keep communication lines open: Open communication channels can help keep relationships alive, which could potentially lead to a return of boomerang employees.
Investing in a good offboarding system can help ensure the entire transition goes as smoothly as possible and that your employees leave with the best impression of your company. If they leave with only positive things to say about their experience, it will benefit the company’s reputation in the future. This can help attract potential new employees and build a sense of loyalty among current staff, improving your work environment.
» Is workplace culture important? See why it matters and how to improve it
Increase Productivity Through Efficient Onboarding & Offboarding
While it may not seem like it, both onboarding and offboarding have a huge impact on the way your employees behave and feel about your company. Following the best practices outlined above will help ensure your employees feel fully supported by your organization, fostering loyalty and helping maintain relationships for years to come.
As a final note, it's worth mentioning that using the right payroll software can help streamline the onboarding and offboarding processes. Adopting automated payroll can make these processes easier for both parties by making accurate calculations and potentially projecting how the future of the business will unfold.
» Want to streamline your onboarding and offboarding processes? Read TBR's payroll software reviews and find the right solution to help you along the way.
PayrollSetting Up Payroll and Taxes for Remote Employees in 2023A new year often means new opportunities for a better business year than the previous one. And with 2023 on the horizon, new projects & opportunities could require adding new workers to your remote team. After all, your talent acquisition strategy should aim to expand your talent pool, and doing so as a remote company with flexible working schedules is much easier.
However, the legal and administrative process of setting up payroll for a new member of your team can be quite daunting, as it requires collecting the right paperwork and staying up-to-date with relevant tax laws to make sure your employee is properly compensated and reported on. All this can easily confuse you, but we're here to help—read on to learn how to manage and structure payroll and taxes for your team of remote employees.
» Want to hire remote employees? See how to manage your global workforce
Key Considerations Before You Get Started
Before you choose your payroll software and start setting up the entire payroll structure of your organization, you first need to understand that you'll be primarily working with two types of workers: full-time remote employees and independent contractors. Let's understand the differences between them:
Full-Time Remote Employees
Full-time remote employees are those who work for the company on a permanent basis and receive regular compensation. They usually have set working hours and follow the employer's policies. Full-time employees are often considered 'employees' in the eyes of the law, which means you'll have to withhold income taxes and social security contributions from their salary. In addition, you'll also be responsible for providing them with all the full-time employee benefits.
Independent Contractors
Independent contractors are workers who don't receive regular salaries or additional benefits associated with working for the employer. They're often hired on a project-by-project basis and paid according to their services. Unlike full-time employees, independent contractors aren't considered 'employees' in the eyes of the law and are thus not subject to withholding taxes or social security contributions from earnings.
So, setting up the payroll process is easy for independent contractors—the real difficulties come with setting it up for your full-time employees. Some key factors to consider before you set up the payroll process for your remote employees include:
Checking the employee's location and ensuring compliance with their laws Researching the fees for bank transfers and fund transfersLooking into exchange rates if your employee accepts payments in another currencyFinding a payment method suitable for them, whether it's a direct deposit or through an e-wallet
Setting Up Payroll for Remote Employees
To avoid legal issues and minimize stress while managing payroll, you need to know how to properly set up the system in your organization. As you can see below, this depends on your employee's country and state of residence.
Remote Employees Residing in the U.S.
If your remote employee resides in the U.S., you need to comply with local, federal, and state-level tax legislation and collect the correct employee information, such as their social security number, address, and other necessary data. If the employee is in the same state as your business, the company should withhold state income taxes according to the state's jurisdiction.
On the other hand, if they reside in another state, you'll have to comply with the employee's local regulations.
Remote Employees Living Abroad
If your remote employee resides in another country, you need to be aware of the country's jurisdiction and comply with it by determining how much tax needs to be collected from the employee and remitted to the government. Usually, this requires establishing some form of legal entity in that country, like opening an LLC or an LP.
To avoid this administrative hassle, the easiest solution for handling full-time employees working abroad is hiring them as independent contractors or partnering with a global employer of record. Another alternative is to outsource a multi-country payroll provider to pay for its international employees.
» Outsourcing payroll: see if HR functions still do it
Setting Up Taxes for Remote Employees
Taxes are a critical part of managing payroll for your remote workers. As previously mentioned, the local and federal laws vary depending on the employee's location, so you need to make sure you comply with the taxes associated with each of your remote employees. Usually, the employer pays local taxes in the country/state where the employee works in addition to registering with local and state tax agencies. Let's dive into more detail regarding taxes.
Remote Employees Residing in the U.S.
For remote employees living in the U.S., you need to collect and pay local, state, and federal taxes. This means withholding income taxes from your employee's wages on a semi-monthly or monthly basis and filing appropriate tax forms with the IRS (Internal Revenue Service). In addition to potentially registering your business in every state where you have a remote worker, you'll also need to familiarize yourself with the state's laws and calculate the relevant taxes at a state level.
Remote Employees Living Abroad
If your remote employee is living outside the U.S., you need to comply with foreign taxes and regulations. This might include setting up a legal entity in that country, registering for social security, and understanding the tax implications of paying an employee abroad. It's worth mentioning that most countries have a double-tax agreement, ensuring workers only pay taxes in the country they're currently residing. Nevertheless, this tax rate can vary vastly, so you have to make sure you have the right info.
» Tax ID vs. EIN: see the difference
Properly Set Up Payroll and Taxes for Remote Workers
Setting up the payroll process and properly managing taxes can be challenging, but if you're familiar with the relevant laws, the underlying challenges will be easy to overcome.
Nowadays, the majority of remote businesses use good payroll software to manage salaries for remote workers. These tools will save you a lot of time when processing payroll and taxes, in addition to helping you stay compliant with all relevant laws. Also, adopting an automated payroll solution will provide a way to properly set up the entire payroll infrastructure.
» Need help setting up your payroll for remote employees? Read TBR's payroll software reviews to find the right solution for your remote business needs.
Hr functionStartup Culture vs. Corporate Culture: Key Features & Fundamental DifferencesStartups and corporations generally have different types of cultures—typically, the former is more exciting and unique, while the latter is more stoic and rigid. But before comparing the workplace culture of the two types of businesses, it's crucial to understand the difference between a startup and a corporation. A startup refers to a business in the early stages of development that's generally viewed as a young and innovative enterprise, while a corporation is more established and will function at a methodic and slow-moving pace, with an emphasis on productivity. In this article, we'll see what the fundamental differences between the two are.
» How important is workplace culture? Learn why it matters and how to improve it
What Is Startup Culture?
Startup culture is vastly different from corporate culture. Be it in the middle of Silicon Valley or in Hong Kong, startups focus on various ways to achieve growth, whether through problem-solving or facilitating open communication among all personnel. A smaller business that just opened its doors will thrive on working around the clock and exploiting any investment opportunities that come its way.
5 Key Features of Startup Culture
Here are five key features of a startup culture:
Purpose: The new generation desires a sense of purpose when joining a firm, and smaller outfits certainly make you a critical aspect of the team.Adaptability: In today's hyper-globalized economy, it's essential to adapt to anything that changes on the fly. By acclimating to your surroundings, you foster a more creative and innovative climate.Innovation: Startups aren't trying to reinvent the wheel but to use innovation to solve common problems or find a different way of using a product or service.Values: Do startups already maintain a set of values, or are they developing as the company grows? Whatever the case, startup cultures survive and thrive by depending on the core principles of a firm.Excitement: A startup's workplace is about excitement, fun, and problem-solving. Everyone is working toward a common goal, and they want to be there, as opposed to just waiting to collect a paycheck.
Pros and Cons of Startup Culture
Here's a look at some of the pros and cons of startup culture:
Pros
Employees can learn and grow during their time at a startup.Depending on the startup, employees can enjoy a broad array of perks and benefits and a strong workplace culture.Workers might be offered stock options as part of their compensation package.
Cons
As it could fold at any moment, a startup can be a risky endeavor for employees, so there's a lack of job security.It's common for startups to require long hours at the office to help grow the business.A young and small firm will ultimately offer low salaries because it's still growing.
What Is Corporate Culture?
Corporate culture may be best defined in the cult classic "Office Space," as a group of employees stuck behind a computer in their cubicles filling out TPS reports. Many experts view corporate culture as being about hierarchy and stagnation rather than growth and innovation.
4 Key Features of Corporate Culture
Here are four key features of corporate culture:
Development: Companies that wish to retain the best and brightest employees will offer better professional and training development.Advancement: From lead supervisor to vice president, corporations extend advancement opportunities to the best employees as a form of recognition to ensure the smartest folks will lead the organization.Formality: Corporate environment is seen as more formal, as everybody follows a pre-defined set of rules in terms of start and end times, attire, breaks, behaviors, and other outlined corporate principles.Responsibility: A corporation will delegate assignments and tasks and ensure employees only concentrate on what is presented to them. Essentially, this means everyone must stay in their lane.
Pros and Cons of Corporate Culture
Here are the pros and cons of corporate culture:
Pros
Paycheck: You can be confident that the large company will be around tomorrow, meaning that you can enjoy a steady paycheck.Hours: The office only operates at certain times of the day, so your schedule is already established, giving you plenty of time to do stuff outside of working hours.Certainty: A corporate culture thrives on certainty. In other words, everything will be the same tomorrow as it was yesterday, from the workforce to values.
Cons
Innovation: It can be challenging to innovate in a corporate environment, whether due to the sheer size of employees or the potentially stoic atmosphere at the office.Communication: The corporate culture has a communication problem because of the multiple managers, supervisors, departments, and procedures. It can be hard to get in touch with everyone for a final decision.Indifference: Studies show corporate employees often feel as if they're a cog on a wheel without offering anything significant or becoming part of anything unique. This can create an aura of apathy, resulting in a wide array of consequences on productivity or work quality.
3 Fundamental Differences Between Startup and Corporate Culture
The dichotomy between startup and corporate culture is enormous, as both types of office environments maintain their own sets of advantages and disadvantages. Here are three fundamental differences between the two:
Internal controls will vary between startups and corporations. In some instances, a startup culture won't have any internal controls, which could lead to chaos should anything go south.As previously mentioned, there will most likely be considerable gaps in employee compensation and benefits between these climates. A corporate culture will start with higher pay, while a startup culture might one day offer higher pay.It is much easier for startups to correctly classify employees compared to corporations, as they deal with considerably fewer employees. When the gap in payroll numbers is this enormous, it could result in employee misclassification.
» Are you properly compensating employees? See some tips for managing workers' compensation
Know Your Company Culture
Both startup and corporate culture have their advantages and disadvantages—it's all about perspective, the company, and what's being sold to customers. The makeup of the team also matters, so when you manage your global workforce, you need to understand your employees and determine if they like a fast-paced environment or a calm and steady one.
» Both startups and corporations need streamlined payroll. Read TBR's payroll software reviews and find one that best aligns with your business needs.
Compliance servicesHealthcare Compliance Auditing: 8 Business Tools for Effective ComplianceIf there's one industry that endures the most bureaucratic paperwork, it's got to be the healthcare sector. The healthcare industry needs to fill in a broad array of forms to comply with rules and regulations at the federal or state level. But the thankless tasks of healthcare compliance, whether to avoid fraud or to submit claims, can easily be accomplished using the best tools available for your specific needs.
» Ensure payroll compliance: see how to avoid penalties
Types of Healthcare Compliance Audits
Before we dive into the various tools healthcare professionals can use, here are two types of healthcare compliance audits that are regularly performed:
Internal Audits
An internal audit is done through operational tasks, processes, resources, structures, and systems. Essentially, an internal audit is about assessing and improving the organization's quality management system.
External Audits
An external audit refers to evaluating specific features of a healthcare firm that improves hospital compliance programs. This kind of audit, which can apply to government and commercial insurance health entities, provides the office with an outside perspective to assess the professional standards, workflows, and domestic processes.
1. Procedural Checklists
Procedural checklists are an essential tool for healthcare compliance auditing. The checklist is used to ensure the healthcare organization follows the rules and regulations in place, and it should include a list of all items that need to be audited, along with the procedure for each of those items. The procedural checklist should be tailored to the organization's needs and based on the audited areas. Procedural checklists for healthcare organizations are different from those of a retail store or consumer organization and should include all key elements, such as medical documentation, patient health records, and healthcare billing.
A procedural checklist is useful because it helps ensure all necessary items are being audited. It can also be used as a training tool for new auditors and future audits. Checklists ensure important things aren't forgotten and that everything is accounted for.
2. Proper Compliance Planning
As compliance is an integral part of healthcare, a properly prepared compliance plan is an essential tool for effective healthcare compliance. The compliance plan should be designed to ensure the safety of both patients and healthcare workers while adhering to the governmental regulations in place for healthcare.
Ideally, a comprehensive compliance plan should include the following:
Written standards, procedures, and policies of conductRisk management assessmentsEmployee training planCommunication strategiesInternal monitoringKeeping abreast of regulatory changes.
3. Process Automation and Data Management
As patient volumes in healthcare are increasing at a dramatic pace, there's an increased focus on data security, patient data management, and patient privacy. To ensure healthcare organizations are prepared, it's vital to automate critical tasks related to data management and ensure any data management strategies and tools in use are highly secure. Patient data is highly sensitive, and it's imperative that healthcare organizations have a system that ensures data safety and security. Any violation of patient privacy can complicate things for the organization.
This step can help healthcare organizations minimize the risk of data leaks and breaches by ensuring effective data management strategies are in place.
4. Computer Assisted Audit Techniques (CAATs)
Computer-assisted audit techniques (CAAT) are critical for healthcare. CAAT is a method of gathering electronic records and simplifying and automating large volumes of data to ensure improved adapt analysis. CAATs make the audit process less disruptive for healthcare organizations and can reduce the time required to complete the audit. In addition, they improve accuracy and compliance, reducing the chance of error.
5. Detailed Records and Patient Information
Healthcare organizations are required to maintain detailed records and comprehensive patient information. As a result, they need effective record-keeping tools to collect and analyze this data for informed decision-making. Most healthcare organizations today are required to maintain electronic health records. Still, whichever method is in place, the important thing is to organize this information in a manner that is useful for clinicians to evaluate and refer to, much like you would when you are creating records to manage your workforce.
This might be a tedious step, but patient data is extremely valuable and critical for improving the efficiency of both clinicians and the healthcare organization itself.
» Automated payroll improves efficiency as well: see why you should ditch manual payroll
6. Risk Evaluation
Risk assessment is a very useful tool for analyzing, assessing, and setting priorities in healthcare. Risk evaluation allows healthcare organizations to identify potential hazards, risks, and threats. Once the risk assessment and identification process are complete, a healthcare organization can estimate the level of risk and identify actions that will minimize important risks.
It's important to remember that healthcare organizations are high-risk and complex, with multiple factors at play (professional, technological, and organizational). Risk evaluation is essential for patients and healthcare workers, as well as ensuring a good reputation for the healthcare organization.
7. Procedure Reviews
A procedural review is a formal, structured assessment of a system or process within a healthcare unit. The goal of this review is to identify problems and implement change to ensure continuous improvement, as well as implement an effective governance program. In healthcare, any procedure that affects patients, workers, managers, and support staff needs to be evaluated to ensure there are no safety and quality issues or security breaches.
For example, reviews of adverse patient outcomes or workplace grievances can ensure a healthcare organization delivers quality care and guarantees workforce safety and satisfaction.
This may be one of those circumstances where you can take advantage of one of the many types of PEOs (professional employer organizations).
8. Compliance Training
Healthcare is a highly regulated sector. Medical facilities generally can't operate legally without proper, in-depth healthcare compliance training. This should be an ongoing process to educate healthcare employees about their responsibilities and legal and government regulations. Such training should form an important part of the workplace culture.
In addition, healthcare compliance training is critical to ensure appropriate policies and processes are set and effectively communicated to all relevant parties. Adherence to regulations, policies, and producers is a priority in healthcare and a chief component of workers' compensation, so it's important to train the healthcare staff accordingly.
Conclusion
From better payroll compliance to improved office efficiencies, there are many compliance audit measures healthcare offices can enjoy to enhance their compliance efforts. Whether it's better compliance training or adopting computer-assisted audit techniques, there are many steps you can take to ensure your operations are in compliance.
» Want your payroll to function without a hitch too? Read TBR's payroll software reviews and make an informed decision.
Hr functionHow to Expertly Forecast Labor Demand to Optimize Labor CostForecasting labor demand is essential for any business to efficiently manage its labor costs. Accurately predicting the amount of staff you need for a given period of time can not only help you optimize the labor costs in your organization but also allow you to manage your workforce more efficiently. A precise labor demand forecast will allow you to meet customer demands while remaining cost-effective and ensuring your company isn't overstaffed or understaffed.
This article will outline the steps you need to take to expertly forecast the labor demand for your business and optimize labor costs. It will also discuss the key considerations when making predictions and provide tips on improving accuracy. Finally, it will explain the importance of regularly monitoring labor demand and adjusting forecasts accordingly so your business is prepared for any scenario.
» Labor costs can be reduced through a global workforce. See how to effectively manage yours
What Is Labor Demand Forecasting?
In simple terms, labor demand forecasting is the process of predicting the amount of staff a business will need to meet customer demands over a given period. Organizations predict labor demand based on a variety of data sources, including past performance, customer trends, and seasonal changes. A successful labor demand forecast will provide an organization with an accurate estimate of the staff that will be needed to avoid over- or understaffing.
There are multiple reasons why forecasting labor demand is a vital process for any organization. By accurately predicting the number of employees needed to meet customer demands, organizations can minimize the labor costs they incur. In addition, forecasting helps organizations prepare for any changes in customer demand, allowing them to react quickly and staff up or down as necessary.
» Need to staff up? Expand your global workforce with the right strategy
5 Proven Labor Demand Forecasting Techniques
As a data-driven process, labor demand forecasting is best performed using a combination of techniques and a human resources information system (HRIS) to ensure accuracy. Here are five of the most effective and proven techniques for labor demand forecasting:
1. The Delphi Method
The Delphi Method is a structured process involving multiple rounds of expert-led questionnaires or surveys. It requires gathering feedback from various stakeholders—including management, supervisors, and employees—which is then used to generate a consensus forecast of the labor demand for a given timeframe.
There are multiple variants of the Delphi Method you can try using in your organization:
Brainstorming – involves gathering opinions from stakeholders in an open and creative environment to generate ideas.Nominal group technique – focuses on gathering input from a smaller number of experts. Survey research – requires gathering feedback from a larger group of stakeholders with the help of surveys. Focus groups – involve gathering opinions from a smaller group of stakeholders in an interactive setting.Statistical modeling – uses statistical models to generate an accurate forecast of labor demand.
As you can probably guess, the Delphi Method is an effective tool for labor demand forecasting in various situations. For example, it can be used to accurately predict the amount of temporary staff needed during peak periods, such as holiday seasons or sales promotions. It can also be used to forecast the labor requirements for new business initiatives or to estimate the staffing for a new product launch.
2. Historical Analysis
Historical analysis is a simple yet effective forecasting technique that involves analyzing past performance to accurately predict future labor demand. This method considers past trends and patterns, such as customer demand, seasonal changes, and employee performance.
Depending on the use case, there are multiple different types of historical analysis you can try performing at your organization:
Time-series analysis – uses data from past periods to generate an accurate forecast for the future. Event analysis – looks at specific times when there have been significant changes in demand and uses this data to project future trends. Seasonal analysis – analyzes specific months or times of the year when demand is typically higher and uses this data to make projections for future labor requirements. Regression analysis – examines past performance and looks for patterns that may indicate future labor demand.
As a labor demand predicting technique, historical analysis best forecasts the labor demand for a specific period. For example, businesses can use this technique to accurately estimate the number of employees needed during peak periods such as Christmas or Easter. However, you can also use historical analysis to predict the amount of staff needed for a new product launch or a business expansion.
3. AI Forecasting
AI forecasting is a technique that relies on Machine Learning (ML) and Artificial Intelligence (AI) algorithms to accurately predict future labor demand. Modern technologies have the ability to use historical data and patterns to generate forecasts with great precision with a minimum of human intervention.
Your organization can utilize AI & ML to predict labor demand in the following ways:
Predictive models – use historical data and Machine Learning algorithms to generate accurate forecasts. Natural language processing (NLP) – a technique that uses AI to analyze various sources of data and generate insights. AI-powered recommendation – uses customer data to personalize recommendations for labor demand forecasting.
AI forecasting is a powerful tool for organizations looking to optimize their workforce planning in every scenario. By using predictive models and AI-powered recommendation engines, businesses can accurately predict customer demand, seasonal changes, and employee performance. It can also help predict the impact of changes in the labor force on the future demand for a specific job, optimize employee scheduling, and minimize overtime costs.
4. Quantitative Data Analysis
Quantitative data analysis is a technique used to analyze measurable data and draw meaningful insights from the results. It involves collecting data about the labor force, performing calculations, and interpreting the data to generate an accurate forecast.
There are multiple approaches you can take to perform quantitative analysis, including:
Statistical analysis – looks at data collected from a variety of sources to generate accurate predictions. Econometric modeling – uses economic data and mathematical models to forecast labor demand. Time series analysis – looks at the historical data to identify trends and patterns that may be used to predict future labor demand.Machine Learning algorithms – analyze large sets of data and generate accurate forecasts.Monte Carlo simulations – use probability distributions and random sampling techniques to generate predictions.
These advanced techniques can be used to forecast labor demand in a variety of ways, from predicting customer demand to anticipating changes in the labor force. Quantitative data analysis can also be used to optimize employee scheduling and minimize overtime costs. By combining quantitative and qualitative data analysis techniques, businesses can create accurate forecasts and make informed decisions about their workforce planning.
5. Market Research
Market research is a technique used to identify potential labor demand from the market. It involves gathering and analyzing data about customers, markets, competitors, and other factors to determine the potential demand for a particular job or skill set.
Depending on what insights you exactly need, you can try different ways of conducting market research:
Surveys – allow businesses to gather data about customer preferences to determine the demand for specific skillsets. Focus groups – identify trends and patterns in customer behavior. Interviews – gather data from experts in the industry and gain insights into potential labor demand.
Market research can be used to forecast labor demand in various ways, from identifying customer needs to tracking market trends. It's an effective tool for businesses looking to optimize their workforce planning in any scenario.
Benefits of Labor Demand Forecasting
Besides the obvious advantages of reducing labor costs and increasing productivity, accurate labor demand forecasting can provide your businesses with several other benefits:
It will help you avoid fraud in the personnel cycle and recognize potential emergencies in advance. By receiving precise predictions of labor demand, businesses can adjust their workforce planning accordingly and remain competitive in the market. Labor demand forecasting also allows you to track workers' compensation, which is essential for ensuring compliance with the law and maintaining an ethical workplace. By predicting labor demand accurately, businesses can identify potential growth opportunities, attract and retain top talent more easily, and make informed decisions about the workforce.
Overall, having precise labor predictions is critical for your business, as it helps you plan your workforce in the most cost-effective and efficient way possible. Without it, your business risks running into labor shortages and high turnover rates, which can seriously impact the bottom line.
» Avoid other business risks: make sure you're payroll compliant to avoid penalties
Common Challenges Associated With Labor Demand Forecasting
If your organization is new to labor demand forecasting, you may find it tricky to implement in your business. Some common challenges associated with this process include:
Data accuracy and availability – without accurate data, businesses can’t make reliable forecasts. To ensure accuracy, you need access to quality historical data and up-to-date information about the current market. Difficulty interpreting data – just having access to data isn't enough—businesses need to be able to interpret it correctly. This requires a deep understanding of data analysis techniques and the labor market. Difficulty forecasting future trends – since it’s subject to constant change, labor demand can be difficult to predict. Businesses need to stay ahead of the curve by keeping an eye on the market and staying up to date with current trends.
These challenges can be addressed by using advanced forecasting tools, conducting regular market research, and staying informed about the labor market.
Accurately Forecast Labor Demand to Minimize Labor Costs
In conclusion, labor demand forecasting is an important tool for businesses to maximize their workforce productivity and minimize costs. To ensure its success, it's important to have access to accurate data, employ advanced forecasting tools, and stay up to date with labor market trends. When done right, labor demand forecasting can provide businesses with invaluable insights that can help them stay competitive in the market.
» Staying competitive in the market is easier without worrying about payroll. Read TBR's payroll software reviews and choose one that will help your company thrive.
Hr functionFTO vs. PTO: What’s Best for Small Businesses?In today's economy, small businesses are always trying to find ways to be competitive and grow the business. While many entrepreneurs will look at external factors, a great tool could often be enough to adjust internal policies, particularly if it relates to human resources. Be it better payroll compliance or a strategy to manage and track worker compensation, there are many ways smaller outfits can rein in expenses. This is why it's important to debate the advantages and disadvantages between paid time off (PTO) and flexible time off (FTO).
» Properly compensate for time off: see what features your payroll software needs
What Is FTO?
In recent years, a long list of businesses has adopted flexible time off (FTO) policies—and their prevalence will only expand in the coming years as organizations compete for talent. FTO essentially means employers allow their employees to take time off whenever they need it, rather than instituting a predetermined paid time off (PTO) edict.
How Does FTO Work for Small Businesses?
The FTO policy works in small businesses as it would in larger companies—simply put, private firms will allow unrestricted time off to workers, as long as their deadlines are met and work is completed at the highest quality.
Pros and Cons of FTO for Small Businesses
So, what are some of the pros and cons of FTO?
Pros
Attracting Talent: when a small business is trying to attract and retain the best and brightest, it will be more appealing to qualified candidates if it offers flexibility instead of a rigid schedule.Employee Morale: the workplace culture immediately receives a boost, as more employees want to enjoy an improved work-life balance, which is quickly becoming as important as employee compensation.Money Saver: does FTO save money? Yes! Under a PTO system, employees can accrue paid time off, making it harder to track and pay employees upon resignation. In addition, administrative costs can be immensely reduced because the HR personnel doesn't need to monitor PTO.
Cons
Abuse: although employees who are part of FTO policies are likely to take less time off, there's always the risk of abuse—employees might exploit FTO and take time off whenever they wish.Schedules: another drawback for small businesses embracing FTO is that it could be more challenging to schedule employees, which then leads to other problems, such as difficulty getting work done or collaborating with the team.Compliance: ultimately, FTO could lead to more uncertainty about time off for staff. This could add to costs since it may require legal staff or more HR-related hours.
What Is PTO?
Paid time off is an HR policy that allows employees to bank a certain amount of hours that can be used for any purpose. As the name says, workers are paid while taking time off work for vacation, sickness, or personal days.
How Does PTO Work for Small Businesses?
Experts say that PTO mechanisms are beneficial for small business owners and workers, noting that it's a great tool to retain good employees.
Pros and Cons of PTO for Small Businesses
Here are the pros and cons of PTO for small businesses:
Pros
Better Management: The key advantage of PTO is that it offers the small business some control over unscheduled absences. By knowing when a staff member will be taking time off, the company can better plan and adapt.Transparency: With a PTO policy, employees are far more likely to be open and honest about their reason for not being at work, which is paramount in facilitating a positive employee-employer relationship.Tracking: The HR department will only need to track one bank of paid time off hours rather than separating personal days, sick days, and vacation times.
Cons
Confusion: Employees might not understand the difference between vacation time and other reasons why they might miss work.Costs: Depending on the small business jurisdiction, accumulated paid time off is mandated to be paid to employees on their last days at the company. However, this doesn't apply to unused personal time or sick days, causing problems for workers using the wrong type of paid time off.More Staff: If too many people are taking their paid time off, the small business might need to hire additional staff or have employees on standby, which can lead to a myriad of other headaches.
» Need help managing time off? See the best leave & absence management practices
3 Fundamental Differences Between FTO and PTO for Small Businesses
Here are the three fundamental differences between FTO and PTO for small businesses:
1. Accrual
The first major difference is that a PTO policy requires employees to accrue days throughout the year, while FTO is a benefit extended to employees upfront.
2. Payment
The second key difference is that PTO will be paid out to workers who leave the company. For the most part, FTO isn't paid out to employees when they leave or the hours are unbanked.
3. Work Culture
Small businesses that adopt FTO convey the message that they're more interested in being productive than just being a body in an office setting. Simply put, unlimited time off is fine as long as employees get the job done, which boosts workplace culture and makes employees more satisfied.
» How important is workplace culture? Learn why it matters and how to improve it
Which Is Best for Your Small Businesses?
In the end, which time off policy is right for your small business—FTO or PTO? The answer to this common question will depend on your company's specific needs, such as if you manage a global workforce or you're looking to change the HR department. By navigating your firm's day-to-day operations, you can better understand what's the best policy to integrate into your business model.
» Need payroll software to better navigate time off compensation? Read TBR's payroll software reviews and find one that's just to your liking.
Hr function7 Key Procedures for Creating a Comprehensive Talent Acquisition StrategyCreating a comprehensive talent acquisition strategy is essential for any business looking to attract and retain the best talent in its niche. As a company's employees are one of its most important aspects, a well-crafted strategy can help businesses create an accurate picture of where they are today, determine where they want to be tomorrow, and chart an exact path to get there.
For these purposes, a company needs specific functions to fulfill its long-term goals, like a talent acquisition team and an HR department that focus on managing the current employees and employing new ones. Now, let's get into the depths of talent acquisition and uncover the best procedures to develop a comprehensive strategy.
» Talent acquisition vs. HR: learn their key differences
What Is Talent Acquisition?
Talent acquisition is the process of sourcing and attracting potential employees, screening them to ascertain their suitability for the job, and ultimately hiring them. Namely, the talent acquisition process is usually tailored for each open position to ensure the new hire is a great fit for the job. A good talent acquisition strategy is especially helpful for remote companies, as it will help you scale the business and manage your global workforce.
However, talent acquisition is much more complex than it looks, as it encompasses more than just finding qualified employees and hiring them. Now, with the basics of talent acquisition out of the way, let's go over the most important procedures to create a comprehensive strategy.
1. Evaluate and Readjust Your Current Strategy
When it comes to creating a comprehensive talent acquisition strategy, the first step is to evaluate and readjust your current strategy. This process involves analyzing your company’s existing personnel policies and procedures, as well as the recruiting methods used by the talent acquisition team. Evaluating will help you avoid and mitigate risks like employee misclassification and payroll non-compliance.
Once you’ve conducted this evaluation, you should be able to identify areas that need improvement and create a plan of action to make the desired changes. This will ensure all recruitment efforts are aligned with the company’s core values and objectives—which brings us to our next step.
2. Identify Your Talent Acquisition Objectives
The next step in creating a comprehensive talent acquisition strategy is to identify your objectives. This means you need to determine what kind of talent you’re looking for in terms of the desired skills, experience, qualifications, and attitude for each vacancy.
Of course, this involves outlining the budget for the recruitment process, determining who'll be involved in the recruitment process, and deciding on any tools or techniques that will be used. This is important to ensure you’re able to attract the best talent while staying within the set budget.
» Talent acquisition objectives in 2023: see the recruitment goals your team should set
3. Employ Strategic Workforce Planning Methods
A crucial part of creating a comprehensive talent acquisition strategy is to employ strategic workforce planning methods. This involves forecasting the organization’s future needs with regard to its personnel, as well as developing and implementing strategies for hiring and retaining them.
This step includes researching the best practices in your industry and setting KPIs (Key Performance Indicators) to measure the success of the strategy and determine how cost-effective your strategies are and if there are any areas that need improvement.
4. Strengthen Your Brand
To attract the best talent for your organization, you need to have a strong reputation as an employer, which means you should be active on relevant social media and other online platforms, as well as work towards creating career-oriented content.
Having a good employer brand is key to attracting top talent, but creating it requires time and effort. This process could involve fostering relationships with university recruiters, engaging in job fairs and other events, producing content that appeals to potential job candidates, and making sure your current employees are happy with their current jobs and workplace. Strengthening your company's brand will not only help you hire new talent but will also improve your workplace culture.
5. Rely on Data and Marketing Skills for Effective Acquisition Material
Data and marketing skills are essential for creating effective recruitment materials. This involves understanding which platforms/channels will be most suitable for your target demographic, what type of content to create, and how to structure the messages you’re sending out to potential talent.
In addition, you should focus on making sure the material is easy to understand and clearly conveys the benefits of working in your company to ensure you're reaching the right people for your job vacancies.
6. Create an Airtight Onboarding Program
Once you’ve found the right candidates, it’s time to create an airtight onboarding program that will ensure new hires have all the necessary training, resources, and support they need to be successful in their roles.
An effective onboarding program should include a comprehensive introduction to the organization and its culture, as well as rigorous training and a detailed orientation program. Additionally, your onboarding process should be constantly monitored and improved to make sure new hires quickly settle into their roles.
7. Provide Development Opportunities for Employees
The final step in creating a comprehensive talent acquisition strategy is to provide ongoing development opportunities for your employees, including providing access to learning and development programs, offering career counseling, and ensuring competitive employee compensation and benefits.
You might see this step as redundant, but the benefits it offers say otherwise—it will help your organization remain competitive by having talented and motivated personnel able to reach their full potential. Additionally, it ensures you’re able to retain top talent and build loyalty among the current personnel.
» Are you properly compensating your employees? See our tips for managing workers' compensation
Build a Strong Talent Acquisition Strategy to Fulfill Long-Term Goals
Following these steps will help you create a comprehensive talent acquisition strategy that sets your organization up for success. However, it’s important to note this process should be monitored closely and adjusted if necessary to make sure it remains effective over time. With the right strategy in place, you’ll be able to attract and retain top talent for your organization.
» Looking for payroll software to manage paying new and existing employees? Read TBR's payroll software reviews to learn which would fit you best.
Hr functionRecruitment Goals & Objectives Every Talent Acquisition Team Should Set In 2023One of the main requirements for bringing talent into a company is ensuring the entire organization has its goals and objectives aligned. Recruitment should be a process that's mutually beneficial for the organization and its prospective hires, and as such, it requires special attention.
Setting mutual goals and objectives for recruitment in 2023 should revolve around both short-term and long-term strategies to ensure an effective acquisition process both in the current year and in the future. Additionally, it will allow you to avoid employee misclassification and other hiring-related issues.
Without a common goal, it's almost impossible for an organization to maintain a successful recruitment process. In this article, we'll discuss some of the most important goals and objectives every talent acquisition team should strive for in 2023. So, whether you're just starting out or you've been doing this for years, read on for effective tips.
» Who handles your company's recruitment process? See the difference between HR vs. talent acquisition
1. Determine Your Recruiting Needs and Set Goals Accordingly
First things first—before you even start recruiting candidates, you must determine your organization's needs in terms of how many positions are to be filled. Ensuring a successful recruitment strategy requires setting goals that can be tracked and evaluated, which will help you identify areas of improvement and adjust your strategy accordingly.
Additionally, you should set goals and focus recruitment efforts according to the type of talent you're seeking, like experienced professionals or recent graduates, so you'll know you're targeting the right audience.
Matching your specific needs to your goals is critical, as it will help you identify the job descriptions and advertisement channels that are most effective in reaching the right type of talent.
2. Factor in Relevant KPIs When Setting Recruitment Goals
Setting the right KPIs (key performance indicators) can make a world of difference when it comes to recruitment success. While every organization should determine the right KPIs for their business, there are some common KPIs you should consider, including the time-to-fill, cost-per-hire, quality of hire, and diversity of hire.
Time-to-fill is one of the most important KPIs to track because it will offer valuable insight into how quickly your recruitment process is working and what areas of it may need improvement.
Cost-per-hire is another important KPI that will help you determine how much money your company is spending on the recruitment process. Tracking such data will enable you to set realistic budgets and hold your talent acquisition team accountable for their performance.
Finally, measuring the quality and diversity of hires will help you determine whether your recruitment efforts are successful, which will further help you adjust your recruitment goals accordingly and ensure you're seeking the right type of talent.
» Tracking other aspects of your business: see our tips for tracking worker compensation
3. Offer Positions to Diverse Candidates
As we mentioned, diversity of hire is essential for a successful recruitment process—offering positions to candidates from diverse backgrounds and experiences will enhance your organization’s culture, create a more productive work environment, and help you identify new opportunities.
Furthermore, your recruitment process must be accessible to candidates from as many backgrounds as possible, meaning you should provide equal opportunities to all candidates regardless of race, gender, sexual orientation, or any other factor.
Another often overlooked benefit of diversity of hire is that it can help you source higher-quality candidates. When looking for a new job, many top-tier professionals seek environments that promote a diverse and inclusive culture, so you'll be more likely to attract top talent by emphasizing diversity in your recruitment efforts.
Ultimately, creating an inclusive work environment is not only beneficial from a recruitment standpoint, but it will help ensure your organization remains competitive and attractive to potential talent.
4. Make Good Use of Employee Referrals
Many organizations fail to take advantage of the power of employee referrals in recruitment. Employee referrals are a great way to quickly identify high-performing individuals in a relatively short time frame.
Additionally, candidates who are referred by existing employees are often more likely to stay with the company for longer periods of time, proving more cost-effective for recruiting and potentially even beneficial for existing employees—many companies offer incentives such as monetary rewards or extra vacation days to those who refer successful candidates.
In return, encouraging employees to refer potential candidates can help build loyalty and trust within the organization, while also helping them cultivate their professional networks.
Overall, employee referrals are a great resource to have in your recruitment arsenal that shouldn't be overlooked.
5. Set Up a Talent Community
A talent community is a network of qualified candidates who can be easily contacted to fill open positions within an organization. Constantly updating this pool of potential hires with the latest job openings will help your recruitment team quickly identify high-performing candidates suitable for the position.
In addition, setting up a talent community is an excellent way to build relationships with potential candidates. You can use the platform to keep them updated on the latest news and happenings in your company, while also providing them with valuable resources and information.
Lastly, creating a talent community is also extremely cost-effective, as it can save your company money on expensive recruitment and sourcing services in the long run.
6. Make Your Organization Attractive to Potential New Recruits
The recruitment process is heavily influenced by the company’s reputation, so a great way to make sure your organization stands out amongst potential new recruits is to focus on developing a great employer brand.
This can be done in various ways, such as creating engaging content that highlights the company culture and values, providing a positive work environment, and offering competitive employee compensation and benefits. It's also very important to showcase the career development opportunities your organization offers so that your potential recruits see it as a place where they can grow and further develop their skills.
Another great way to show your organization in the best possible light to potential employees is to focus on building relationships with existing employees. Showcasing the great things they have to say about working at your organization will help make it more attractive to potential hires and create a positive employer brand.
» How important is workplace culture? See why it matters and how to improve it
7. Assess and Improve Your Turnover Rate
A high turnover rate can be extremely detrimental to your organization’s overall performance, so it's essential to do your best to reduce and manage turnover. This will help your organization attract and retain top talent.
To begin with, you should assess your current turnover rate and identify potential areas of improvement. By gaining insight into the reasons behind employee departures, you'll be able to better understand the issues at hand and create solutions to reduce turnover.
Once you've identified potential issues, it's important to take action and ensure they're addressed and resolved. This can be done through improving employee engagement, providing better benefits and incentives, or offering more career development opportunities, depending on what exactly your company needs. Just make sure to measure the effectiveness of the changes you make so you can adjust your approach accordingly. If you manage to improve your turnover rate, you'll be sure to attract and retain the best talent, which will ultimately lead to better organizational performance and long-term success.
Set Your Company Up for Success With the Right Recruitment Goals
Building a successful recruitment process is essential for the long-term success of any organization. By taking advantage of the strategies outlined in this article, you'll be able to create an effective and efficient recruitment process.
Recruitment goals as well as other objectives need to be clearly communicated and implemented to ensure your organization is able to attract the best talent. What's more, a well-structured recruitment process can help you manage your global workforce more efficiently and maximize the potential of current and future employees.
» Reliable company payroll is also important to potential hires—read TBR's payroll software reviews to find one that will benefit your company the most.
