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Applied vs Unapplied Labor

Managing overhead and investment costs are critical to running a business successfully. A massive segment of this is the cost of labor. A business can’t operate without labor, but unchecked and inefficient labor can not only slim your margins but ruin your business. In our other posts, we discussed time and attendance documentation systems and the advantage they offer to service departments. Time and attendance software allows employers to actualize and quantify the amount of work their employees produce, but they also control labor costs, avoid buddy punching, and help manage payroll systems (learn about different time tracking software).

This TimeCard example shows how management software can track employee time and work hours.

A major component to assure your business is running smoothly is to manage applied and unapplied labor. Applied labor is simple: employees work during working hours and are productive. This is the backbone of nearly all industries and an optimized business should maximize this. Unapplied labor is the less ideal side of business. Essentially, unapplied labor is when employees are not maximizing their labor through wasted time. Let’s take a closer look at unapplied labor.

Through this diagram, we see the dangers of unapplied labor, with the example of Employee 2. This shows the use and practicality of Punchey, enabling business owners to accurately manage payroll systems and cut unapplied labor cost. The second column, Hours Clocked In, is accessible via simple cloud sync management software systems. The fourth and fifth columns, Billable Hours and Labor Cost, are both calculated and made available through Punchey, as will be highlighted later on.

Luckily, management software through mobile apps and automated time and attendance documentation can cut down on unapplied labor and improve efficiency. Punchey has the power to allow you to turn unapplied labor into applied labor and costs into revenues.

Let’s take a look at the books from one of Punchey’s clients, whose real employee names have been changed for privacy.

Through Punchey, this business owner has already been able to save tons of hard-earned money! Our streamlined services and management software allow you to maximize payroll systems to:

  • Track scheduled and working hours to know how long a job should take
  • Watch revenue per scheduled hour to account for unapplied labor and calculate a more sensible, business-friendly revenue number
  • List hours paid to show the difference between expected time and actual time
  • Increase employee productivity, improve efficiency, and control labor costs.

On this page, we see another Punchey advantage: labor cost per hour reporting. This provides business owners with a streamlined payroll system to ensure their employees receive appropriate compensation for their work and time. This also reports back to you the labor cost of each employee per hour. To be at profit-maximization, this is a critical tool: it finds how much each employee deserves based on worked hours so they you do not overpay or underpay your stuff. All of this is, of course, calculated and dealt with through the management software so you can focus on running your business.

Finally, this snapshot of our services shows the finalized product of labor cost reporting: payment. The reasoning behind tracking labor hours and labor cost is so that payroll systems can be as accurate as possible, efficiently and fairly paying employees. Labor hours are a perfect way to go about this as, as calculated by our management software, they capture the value of the marginal product of labor per employee. This results in a profit-maximizing wage, or labor hours paid.

Updated on October 10, 2019

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