The risks of not utilizing labor forecasting

Labor forecasting promises many benefits to employers with a large amount of hourly workers. Still, many organizations have yet to utilize this process to inform their decisions on scheduling shifts. 

The risks of overstaffing or understaffing are very real, and organizations should be aware of what exactly they’re risking by not trying to create smarter schedules.

Also read: Labor analytics: A how-to guide for company leadership

Exempt vs. non-exempt workers 

Understaffing poses a significant risk pertaining to exempt/non-exempt classifications under wage-hour law, said Gary Pearce, chief risk architect at risk reduction platform Aclaimant. This is especially relevant when exempt, salaried staff members are working long hours because not enough people have been scheduled to work that day. 

“These people will be far more willing to challenge their exempt status, and there will be no shortage of attorneys ready to convert their case to a class action,” he said.

Employers cannot silently stand by and knowingly allow wage-hour law violations to happen, Pearce added. They have the responsibility to do something about it. 

Also read: Labor analytics add power to workforce management tools

“If frazzled employees are too busy to take uninterrupted meal or rest periods that they are entitled to, or the culture of the workplace is that it is acceptable for non-exempt workers to be asked to finish up work off the clock at home, or stay late but not record all work time in exchange for some future promise, then the employer is again highly susceptible to a class-action lawsuit,” he said. 

Workers’ compensation concerns

Understaffing often leads to overworked and tired workers, which can increase the likelihood of people getting hurt on the job, Pearce said. Not only is this a worker safety risk, but it can open up the employer to workers’ compensation costs that could have been avoided.

Overstaffing also introduces its own risks. “Inexperienced workers are time and again shown to be far more susceptible to injury, and an overstaffing situation might make this more likely,” Pearce said. 

He added that as staffing levels rise, employers need to spend more on workplace costs like training, protective equipment, benefits and whatever other support HR offers employees. 

Impact on unemployment costs

Pearce said that the impact of staffing levels on unemployment insurance costs can be significant. Understaffing can cause turnover when workers start feeling stressed or burned out and overstaffing may lead to a situation where employees don’t feel they’re being challenged. In cases like this, an uptick in unemployment claims may follow, Pearce said. 

“While truly voluntary resignations can be challenged, the system is structured to give claimants the benefit of the doubt and many employers lose challenges either because they are too busy to show up for hearings, or they don’t have sufficient documentation to back up their claims, or they fail to recognize the claimant’s side of the story,” he said. “Unemployment systems vary but there is an experience rating aspect to all of them, meaning that employers with higher claim volume will pay more in unemployment taxes than those with lower volume.”

Complying with the WARN Act and predictive scheduling laws 

There are a few ways in which overstaffing or understaffing can get employers in a difficult situation regarding various laws, Pearce said. With overstaffing, an employer may face a situation where headcount is too high and they must do a mass layoff — thus triggering employer obligations under the WARN Act, which requires employers to provide advance notice in qualified plant closings and mass layoffs. 

Understaffing may inspire a whole different range of legal hurdles with predictive scheduling laws. When managers want to bring people in with short notice due to headcount shortages, employers may have to pay penalties for unexpected schedule changes, for example. 

Keeping workers engaged

Worker alienation is at the heart of these risks, Pearce said.

“If an organization is materially understaffed or overstaffed, it is promoting this alienation and risking becoming nothing more than a commoditized counterparty to be financially optimized in the short run, since the employee has no stake in the long run,” he said, adding that how a company treats its employees can make a difference. “Engaged, happy workers aren’t as likely to obsess with real or perceived harms or seek legal redress for their grievances.”

Here’s where labor forecasting software comes in, by making it easier for employers to avoid these legal risks and by making it more likely that employees can have an appropriate workload and feel satisfied with their schedule. 

“Accurate labor forecasting can not only help to control costs while meeting changing customer needs, but [can] also be a key element in controlling unnecessary workplace risks and meeting the employer’s basic obligations to its employees,” Pearce said.