How to Use Our Labor Cost Calculator to Identify Hidden HR Costs

Manager using a calculator while holding a pen

Labor costs are one of the largest expenses for behavioral health and human services organizations. There are direct labor costs, such as paying providers that directly assist patients, and indirect labor costs like administrative expenses that are not billable to insurance companies. That’s why ContinuumCloud created a labor cost calculator to help agencies better understand how specific business practices may be driving up annual labor costs.

The labor cost calculator can uncover additional expenses associated with outdated practices you may be overlooking. For instance, ineffective payroll processing procedures, disorganized training tracking, complex manual benefits enrollment, and related expenses.

Learn how to identify the hidden costs of inefficient practices with our labor cost calculator and the best ways to maximize your resources.

Understanding the Hidden Costs of Inefficient HR Practices

Labor cost calculator: colleagues talking to each other

Each manual human resources (HR) function or task within your business results in labor costs. These are often “hidden costs” because most businesses aren’t actually thinking about the costs incurred from performing each HR task. Instead, you might be considering the total cost of labor for the department (i.e., the annual salaries or hourly wages being paid to your HR staff) rather than looking into how their time and labor are being used. 

However, when you consider the hourly labor cost of an employee doing each task, many of these manual processes are quite expensive. Explore some of the top HR functions contributing to hidden labor costs and then use the labor cost calculator to find out how much each area is costing your business.

Processing New Hires and Separation

The onboarding and separation stages of the employee lifecycle are filled with paperwork and data entry. Organizations must review the employee’s paperwork and enter the employee’s contact information, I-9 paperwork, W-4 form, direct deposit information, and employment agreement into the company’s HRIS system

For organizations that use several software platforms, such as separate HRIS and payroll systems, duplicate data entry may even be required. However, if you use an all-in-one human capital management (HCM) solution, an employee can enter their information more directly and HR teams can quickly review it without duplicate entry.

Managing Benefits Enrollment

Employee benefits enrollment is a struggle for many small businesses and nonprofits due to the number of steps involved. From obtaining and providing plan documents and comparing benefits plans to confirming benefits selections and dependent eligibility, employers and employees have a lot to navigate during benefits enrollment. 

Manual benefits enrollment can also be a bit clunky and confusing for employees. To help them understand, enroll in, and utilize the benefits available to them, offer a user-friendly way to compare plans and complete enrollment. A digital benefits enrollment portal within an HCM platform can make benefits information more easily accessible to all staff members.

Coordinating Training

Investing in your employee’s training and development is a great thing — unless you’re spending money on inefficient administrative practices associated with training rather than on resources that will actually benefit your staff and clientele.

The labor cost calculator considers the costs of enrolling employees for in-person or virtual training sessions, tracking course completion, preparing and distributing training materials, and obtaining a detailed training history for each employee. These tasks take time but many of them can be streamlined with a digital learning management platform (or an HR platform with built-in training management).

Behavioral health and human services organizations often have greater training needs than standard companies because they are heavily regulated and proper training is a matter of compliance and safety. As such, these hidden costs will add up more quickly when done manually.

Time Tracking and PTO Management

To properly pay hourly workers, you need a detailed account of their work hours. If you have primarily full-time workers, time tracking is a bit simpler. However, behavioral healthcare organizations tend to have a mix of hourly workers, per-diem or on-call staff, and full-time employees. 

Calculating labor rates and payments also gets a bit more complex if you have shift differentials — that is, paying a higher hourly rate for late shifts or weekend work. Your organization also needs to keep track of sick days, vacation days, and other types of leave or PTO used during each pay period. All of this time and PTO tracking can be incredibly time-consuming but you can largely eliminate this hidden labor cost with electronic time and attendance software.

Payroll Processing 

Manual payroll processing is time-consuming and requires a high level of detail, which is why most organizations prefer to use payroll or HR software to help automate the process. Payroll involves more than just multiplying the number of hours worked by the employee’s pay rate and writing a check. 

Employers must calculate a number of different payroll taxes, including Medicare and Social Security taxes, and manage deductions for benefits to ensure accurate withholdings for each paycheck. There are also calculations to be done during each payroll run to ensure employer-paid payroll taxes (like state unemployment taxes) are set aside and paid compliantly.

Performing this whole process manually is extremely time-consuming and leaves room for costly errors. You never want to mess up someone’s payroll as your employees depend on timely and accurate payments for their livelihoods. You also don’t want any tax mishaps. As such, it’s a good idea to invest in an efficient payroll processing solution that can automate all these little calculations.

Expense Management

Expense management is another area of reimbursement that bears some hidden costs. For instance, the time an employee spends manually uploading receipts or documentation, completing calculations like mileage rates, and requesting reimbursement could be better used serving patients or performing other work tasks. Moreover, HR needs time to review, approve, and process such transactions either with the standard payroll run or as a separate payment depending on the company’s procedure. If you don’t automate and simplify the process, a lot of time may be wasted on both sides of the process.

Conducting Performance Appraisals

Performance management is undeniably an important HR function, but it’s also one that gets overlooked by small, busy organizations that don’t have a lot of time for employee management. Filling out company performance review forms for each direct report, recording and tracking performance documentation, and managing compensation related to performance appraisals takes time and money if you do everything manually. Now consider the number of employees each manager must go through that process for.

With inefficient practices, even delivering an annual performance appraisal can be time-consuming and contribute to labor costs significantly. Plus, one performance review a year really isn’t enough. According to Gallup, providing more frequent and timely feedback is critical for employee engagement. However, this is one HR function that can be streamlined fairly easily with the right tools. 

Platforms like ContinuumCloud’s HCM system provide templates that make it easier for managers to create and track performance appraisals – and to provide more frequent feedback to keep workers engaged.

Calculate the True Cost of HR Inefficiencies With the ContinuumCloud Labor Cost Calculator

The ContinuumCloud labor cost calculator is an interactive tool designed to help organizations understand the true costs of inefficient manual practices:

  • Go through a quick step-by-step process to answer a few short questions about your organization and its HR activities
  • Based on your information, the calculator will generate an estimate of the total labor costs associated with your manual HR processes

Note that the calculator uses a detailed labor cost formula to provide a fairly accurate estimate based on Ernst & Young research regarding the specific costs of different manual HR practices, but actual costs can vary based on inflation and the average salary in your region and specialty.

Why It’s Crucial to Maximize Resources and Streamline Processes

Labor cost calculator: colleagues using a tablet

While the hidden costs associated with manually processing new-hire paperwork or running payroll may seem small on the surface, they add up quickly. This is particularly pertinent for behavioral health and human services organizations with limited resources and strained budgets. 

While traditional for-profit businesses may have higher total revenue and better profit margins to accommodate the added labor costs of less efficient practices or a larger team, behavioral healthcare organizations need to stretch the resources that they have a bit further.

In addition to the monetary cost of inefficient HR practices, there’s also an opportunity cost to consider. If your HR manager is spending eight hours a week on tasks that could be automated, that’s eight hours they’re not able to devote to other projects that may have a greater impact on your small business. 

To maximize limited staffing resources, it’s important to streamline administrative processes and work to free up time for HR and management tasks that require a more human touch. This allows your resources to go further without expanding the team and incurring additional costs for labor.

Since most behavioral health and human services organizations already do what they can to cut back on overhead costs and other spending, better utilizing existing resources and reducing labor costs is the next step in promoting better financial sustainability.

Reduce Hidden Costs Now

Using a labor cost calculator is a great first step in identifying inefficiencies but it doesn’t stop there. ContinuumCloud’s HCM platform gives you all the human resource management tools you need in a single, easy-to-use platform.

As the only solution designed specifically to meet the needs of the behavioral health and human services industry, Continuum Cloud is purpose-built for complex organizations. It can better address your needs and help with everything from simplifying onboarding paperwork to quickly and accurately processing payroll.

Contact us today to learn how ContinuumCloud’s HCM platform can transform inefficient, manual HR practices and help you eliminate hidden costs sooner rather than later.

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