Lower Labor Costs Without Firing Anyone

Especially in the margin-tight, high-tech electronics marketplace, electronics OEMs need all the help they can get in cutting costs. Lowering headcount is a pretty typical step toward decreasing costs, but cutting labor costs doesn’t necessarily mean layoffs. Instead, manufacturers should be looking to identify and lessen hidden labor cost rather than always reducing headcount.


“We are seeing a lot of hidden cost in labor across all sorts of verticals, including manufacturing,” said Jenine Bogrand, senior manager of manufacturing of Deloitte’s workforce analytics solution LaborWise. “It’s been prevalent on the retail and hospital side where there are lots of hourly employees but in the last six month, we’ve been seeing it in the manufacturing world. It can be really important in high tech because of the highly paid hourly workers in that sector.”

By comparing overtime expenses and staffing trends in the company to industry averages, organizations have the potential to save a lot of money. “What we are seeing average from hourly cost structure in any organization is savings from one half to two percent in potential savings,” said Bogrand. “It may not seem like much but if you do the basic math on a per employee basis, it really adds up. Even a half a percent is significant.” When you add soft cost savings (such as freeing up managers to do more strategic tasks), the savings go even higher. One manufacturer reported savings of $17 to $20 million between hard and soft savings.

Bogrand points to some potential areas for savings: 

  • Training more junior employees to do straight-forward overtime tasks currently done by more senior employees. Of course, it’s important to check with trade unions to ensure that guidelines and agreements are being followed.
  • Training employees to use overtime systems and accounting appropriately. In some organizations, for example, employees forget to clock out during mealtimes and breaks and so the company is charged, at higher overtime rates, for that time.
  • Planning for employee callbacks appropriately. At times, organizations ask employees to come in for an extra shift but end up getting work done so that employees work for a fraction of a shift but get paid for the whole thing.
  • Reconfiguring time and attendance applications to maximize savings. Something as simple as a tweaking a rounding process can save thousands of dollars for an organization. Or creating an automated call in system to report absences can increase accuracy and save a lot of time for managers.

These types of savings make it an initiative that warrants support throughout the organization, from the financial side of the house to the plant manager. “The CFO is looking at the numbers and will be convinced by dollar savings that can be achieved quickly,” said Bogrand. “Operations folks, meanwhile, know that demonstrating reduced spend improves the operational profile of the factory.”

By achieving measurable savings, organizations can add to the bottom line and even use savings to hire more employees to get more done. 

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