Five Steps to Increasing Employee Profitability

How can companies determine which employees are working profitably for them? The process starts with the ability to separate staff hours spent on business-building activities from those spent on wasteful work. Follow these steps to get started:

Calculate costs. Calculate the true hourly cost of employees per hour. Use accounting information to work out a percentage to add to hourly salaries that covers overhead. For example, you might add 5% to cover office fixtures, equipment and supplies, 10% to cover pension and health care payments, and an additional amount to cover the cost of holidays and sick-leave. Calculate the cost of all “non-salary” expenses and add it to each staff member’s base hourly rate.

Track timesheets. Establish a flexible but accurate way for employees to track their daily activities. They can use a timesheet or spreadsheet program to record the number of hours spent on each activity. Depending on your line of work, it may help to ask them to group activities by project.

Analyze data. Information entered by employees can be used to generate many reports, such as a report that shows exactly which activities employees spend time on or reports that highlight the cost of team hours by project. Slice and dice the data to give you insight into each team member’s contribution to your company.

Track long-term. Data collected should give you insights into daily, weekly, monthly and annual costs. Use this information to determine if costs are increasing or falling over time.

Discuss results. Show your staff members the true cost of their time and how much each activity they undertake earns or costs the company. Employees are often unaware of this information. You may want to share this data in a group setting to make profitability a team effort.