How Data Can Help SMBOs Better Manage Overtime and Other HR Expenses

A small business owner appearing confused

SMBOs are collecting more HR data than ever, but SMBOs aren't always sure how best to leverage it. Making the most of emerging "people analytics" requires consideration across four key areas: location, permission, interpretation, and integration.

Small and midsize businesses owners (SMBO) often struggle with analyzing employee data. Implementing an HR data analytics solution to help ensure they're hiring and retaining talent on par with larger organizations has become more necessary than ever. While owners recognize the value of analyzing employee data, determining which data points would be most useful and how to leverage them effectively can prove challenging given the limited time and resources at their disposal.

Need a solid starting point? Build out analytics with four key foundations in mind: location, permission, interpretation and integration.

HR for SMBOs: Information in Waiting

According to Venture Beat, while 97 percent of HR departments collect valuable metrics, the number of teams that struggle to gather and analyze these metrics is roughly the same, "mainly due to data systems that are poorly integrated and uncertainty over what to measure."

That uncertainty, combined with a lack of awareness about the potential insights that can be gained from HR data, is a common refrain.

Another common challenge for SMBOs: day-to-day business operations and employee activities generate a lot of data, and it accumulates quickly. A lot of it has value, but extracting this value remains a challenge because the sheer volume of data sources and input types.

To tackle this issue, SMBOs may want to focus on key data categories within their HR systems, such as:

  • Benefits — Benefits information can help track existing spend patterns and enable SMBOs to predict future use cases and budgets.
  • Payroll Knowing how much you spend on hourly wages, salaried employees and applicable tax withholding is about more than just the bottom line: Leveraging this data can help identify staffing trends that can be addressed, such as sharp increases in overtime.
  • Time Tracking Minutes and missed shifts matter. Data contained in time tracking software can be used to discover weekly, monthly or seasonal attendance patterns and inform long-term scheduling policies.
  • Compliance —Size doesn't matter when it comes to compliance. SMBOs are responsible for securing both their customer and employee data, even if that data is managed or stored by a third-party provider. Regular compliance insight can help inform necessary changes before warnings or fines are levied.

Permission Critical

Permission forms the next pillar of effective HR data analytics. As Deloitte notes in a recent study, while 84 percent of survey respondents said "people analytics" is an important part of performance improvement and 70 percent are "in the midst of major projects to analyze and integrate data into their decision-making," this shift to people-driven insight also comes with the critical step of seeking permission.

Just as consumer data use requires notification about potential third-party utilization in accordance with new legislation like the GDPR and compliance regulations like HIPAA and PCI DSS, staff information must be treated in the same way. For SMBOs, this means asking permission — not forgiveness — when obtaining and analyzing employee information.

Context is King

According to Information Age, less than half of all organizations are using HR-driven analytics to inform day-to-day operations, and 35 percent of businesses point to not having the right knowledge or skills within HR as a limiting factor.

In many cases, the challenge here lies with context. Simply having valuable data isn't enough in isolation; the ability to derive actionable insights depends on the application of context when interpreting data and crafting responses.

One problem is a lack of benchmarking data to be able to assess/compare results in a way that allows a business to set goals or track meaningful KPIs. It's one reason that the ADP Research Institute® published its first annual State of the Workforce Report in 2019. As a result, companies of all sizes and industries can benchmark their internal data against HR metrics as the national level.

Another challenge is looking for correlations that help explain specific trends. For example, consider an SMBOs struggling to understand why payroll expenses skyrocket during the spring. Records of overtime hours and staff shortages don't explain the phenomenon on their own. But taken in context with sick leave stats, it may be possible to draw more effective conclusions. Seasonal allergies affect millions of Americans each spring, and the added costs could be tied to increased overtime.

In turn, insights like these could allow businesses to bring in extra staff during the seasonal transition to dodge paying more in overtime.

Putting Data to Work

Last but not least is the issue of integration. Despite advances in HR technology, many SMBOs are still using legacy systems to track HR data. What's more, owners don't have time to analyze existing shortfalls. As Forbes notes, 86 percent of SMBOs work weekends, more than half only eat one meal at home each day and over 75 percent are still working even when they're on vacation.

As a result, small businesses need solutions for payroll, benefits and time tracking that integrate with existing workflows without increasing operational complexity. It's often more time- and cost-effective to consider HR outsourcing, as the right partner can not only streamline human resource reporting and data collection but also provide the analytic framework necessary to deliver valuable insights on demand.

Data scientists at ADP are able to work with clients to make the most of the systems and data available to produce business insights that go beyond day-to-day operations and set the stage for more effective business planning.

"No matter how great the data and system, we still need to provide the most accurate and useful insights we can for the people who use them as part of their business strategy and decisions." — Manoj Oleti, Lead Data Scientist/Technical Architect at ADP

Better data drives better business outcomes, and for SMBOs to realize the full value of HR data analytics, it's critical to opt in across the four key areas of location, permission, interpretation and integration.

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