Business management legend Peter Drucker said, “You can’t manage what you don’t measure.” The quote is an oldie but a goodie, and applies to every aspect of your business.

You want to make more money? You have to track your cash flows. You want to be more efficient? You have to track your output. You want to improve your working environment? You have to track HR.

That last one may seem different than the first two — human resources seem so… intangible. It’s full of soft, qualitative information. Even factors like employee performance can be hard to put into numbers.

But just because it might seem a little fluffy doesn’t mean it is, and it doesn’t mean it’s any less crucial to your business’s success.

Employee expenses are probably the biggest costs on your books. If they aren’t carefully tracked, they can quickly become a black hole, and leave you, as a business owner, scratching your head wondering why employees are disengaged and your productivity is slipping.

If you want to get control of those costs, here are three tips to get you started:

1. Identify what you’re currently spending on your employees.
2. Assign dollar amounts to hidden fees.
3. Account for financial exposure to liabilities.

Gathering information

Money can pour out of a business in dozens of places. We might often dismiss these costs as insignificant or simply the cost of doing business, but every dollar spent that doesn’t create value for your company is a dollar wasted — and that waste can add up to tens of thousands of dollars over the course of a year.

So, your first step in quantifying your employee costs is finding the holes. If you don’t already, start tracking things like:

• Attendance (including when employees arrive).
• Paid time off (including sick days and injuries).
• Employee satisfaction and performance.
• Health benefits claims vs. premiums paid.
• Management time allotted to HR.

Assigning dollar amounts to hidden fees

Everything comes with a cost. Even the amount of pep in your newest employee’s step has an impact on your bottom line. While it’s impossible to attach an exact figure to everything, with a few assumptions, we can almost always get close to a true cost for things we can barely see. For example:

• Calculate the true cost of turnover using 33 per cent of the departing employees’ salaries.
• Add up lost wages from absenteeism by counting the time employees arrive late or leave early over the course of a month and multiplying it by their hourly wage.
• Count the cost of injuries by assuming $40,000 in expenses per injured worker (which includes paid time off, replacement labour and overtime, increases to WSIB premiums, and disengagement).

For a full list of things to consider when calculating your costs, reach out to an expert at hello@eiosolutions.com and we’ll help break them down.

Counting exposure to liabilities

Even if a government fine or a lawsuit catches you by surprise, it has to be paid, so it still counts as an employee expense. The best we can do is determine what you might be on the hook for ahead of time.

Run down a list of things a Ministry of Labour rep might audit you for (and their associated fees), including:

• Health and safety policies and procedures.
• COVID-19 protocols.
• Employee documentation.
• Training certifications.

Review employee contracts with a legal expert to understand their rights as well as your own — especially regarding layoffs and terminations — to identify severance entitlements and learn what could constitute a wrongful termination (and what the settlement costs could be).

If you’re risk averse, you can count these liabilities as presumed costs and plan accordingly, or you can make assumptions about the likelihood of them occurring. If, for example, we can assume a five to 10 per cent chance of a Ministry of Labour audit in any given year, we can estimate our total annual cost at five to 10 per cent of our total exposure.

Insights empower better business decisions, so one of the most important things owners can do is get a full picture of their employee costs. The great news for Landscape Ontario members is: you don’t have to calculate anything on your own. As part of your membership, you are entitled to a free 1:1 EIO Health Check, where in a 90-minute session, an EIO Expert will work with you to understand your business and create a scorecard to quantify all those hard-to-see employee costs.

To learn more and book your session, simply visit eiosolutions.com/landscape-ontario.

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