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Labor Cost Optimization

Stop payroll leakage and improve the bottom line, workforce productivity and performance


Enterprises could be overspending on labor by up to 2 percent or more of total annual payroll. If you’re like many leaders, you’ve exhausted traditional and painful initiatives aimed at cost reduction — perhaps with mixed results. And if your systems were implemented using the standard technology centric approach the outcomes were designed to mirror past processes rather than drive dramatically improved financial and operational results. New sources of measurable cost reduction are hidden in your business complexities and systems.

Deloitte is leading the industry in workforce management (WFM) enablement and can help your organization meet its cost saving goals by finding significant bottom line savings. Our clients are leveraging our advanced workforce analytics tool, LaborwiseTM and Labor Cost Optimization methodology to find, quantify and fix hidden sources of labor overspending and realize impactful labor savings. Deloitte offers tools and insights that can help clients achieve sustained savings, improvements in labor activity management and a workplace modeled around leading practices.

How we can help

Labor Cost Optimization is taking center stage as a strategic workforce management imperative that can have a measurable impact on an employer’s ability to prevent and avoid labor overspending. WFM applications such as timekeeping, labor scheduling and absence management are where policy, people and practice converge and result in unintended cost and lost productivity. Rather than taking a financial approach to WFM, companies usually view their WFM system only as transactional back office applications — even though labor can be an organization’s single largest expense, usually accounting for 30 percent to 70 percent of total expenses.

WFM is a cross-disciplinary domain that necessitates integration with HR, Payroll, Finance and I.T. functions. To address this complexity, Deloitte brings the required deep knowledge in Labor Cost Optimization, Workforce Analytics, Workforce Management, Technology, Human Capital and Industry, along with the latest methods and practices. We guide you in your efforts in identifying your pain points to the establishment of a workforce management office and deployment of enabling technologies.

By combining ground breaking work in Labor Cost Optimization and hands-on knowledge of the latest software solutions, Deloitte is helping employers position their WFM technology for measurable, sustainable and transparent cost reduction and improved labor management and utilization. Our approach to achieving cost savings is a six step process that has a “design with intent” strategy at its heart.

  1. Plan — Prepare for a new model of technology enablement around workforce management. Create a remediation plan by right-sizing and prioritizing each LCO initiative for continuous WFM improvement. Develop a deployment and change management strategy that aligns people, policy and technology towards specific outcomes and goals.
  2. Find — Uncover the root causes of payroll leakage hidden in outdated processes, entrenched behaviors and misconfigured technology. Payroll leakage is unintentional or unexpected labor overspending that directly impacts the bottom line.
  3. Quantify — Analyze and translate your labor data into measurable cost saving and productivity targets. Estimate the savings in dollars, output and revenue due to achieving Labor Cost Optimization.
  4. Fix — Design and align policies, processes and technology to financial and operational targets through careful analysis. Strengthen existing systems where these areas manifest into cost and utilization by creating greater controls, transparency and improved accountability.
  5. Realize — Measure achieved labor savings after fixes and updates have been deployed.
  6. Monitor — Continually inspect and react to changes for sustained savings and avoid labor overspending by using the in-context visualizations and embedded corrective actions inside the Laborwise™ toolset.

These steps help your organization focus on outcomes. Deloitte’s Labor Cost Optimization solutions engage not only the technology itself but also people at various levels and in real time. This new outcome oriented approach integrates an advanced understanding of your business with the everyday activities of managing the workforce and expenses. Enterprise WFM technology is repositioned to influence how labor cost and utilization are handled. We are there to help you elevate your processes and systems with continuity of purpose, a high rate of user adoption and the supporting tools and procedures to maintain and continually advance your workforce outcomes.

Potential bottom line benefits

  • Achieve measurable, sustainable savings that directly impacts the bottom line by mitigating and controlling labor overspending.
  • Improve labor productivity and utilization and reduce entitlement risk by finding and fixing the root causes of payroll leakage hidden in outdated processes, entrenched behaviors and misconfigured technology.
  • Design defensible systems and processes to avoid grievances, reduce the number of labor lawsuits and lower the length and cost of compliance audits and expense.
  • Expose and fix unfair and inequitable workforce scheduling and timekeeping practices that result in employee discontent, high absenteeism, turnover of valuable employees and limit your workforce flexibility.

Aim to get more value now

  • How much money are you losing to labor overspending? Perform a payroll leakage assessment with LaborwiseTM, our proprietary workforce analytics tool designed to quantify labor overspending. The amount of savings an assessment can find may be enough to fund other WFM initiatives. Deloitte has recognized leaders who can help in determining the cause and location of payroll leakage and the leading action to take in order to contain it.
  • How do you hold leaders accountable for productive and engaged employees who are paid correctly? Integrate actionable data from advanced labor analytics into individual performance evaluations and goals.
  • Elevate the visibility and authority over workforce management outcomes by instituting a Workforce Management Office (WMO). Modeled after the Project Management Office and a shared services approach — the WMO consolidates ownership and helps prioritize and aligns WFM functions with strategic goals. The WMO streamlines decision-making for improving processes and systems and steers workforce management activities, WFM system design and implementation of Labor Cost Optimization initiatives.
  • Do you have a collaborator who will take the journey with you? The Labor Cost Optimization program may result in changes to WFM technology, processes and policies to address the challenges of keeping your business financially sound and market competitive. Let us share in the risk of reaching measurable, sustained savings targets through a value based billing (VBB) approach.


Lisa Disselkamp
Deloitte Consulting LLP
Bob Kaunert
Deloitte Consulting LLP

As used in this document, "Deloitte" means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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