About five years ago, Wes Stoskopf, SHRM-SCP, realized he had a problem. As vice president of finance and human resources at Phillips Screw Co., a fastener system manufacturer based in Burlington, Mass., he knew he should have a solid understanding of the total cost of the company’s 80-person workforce. But he didn’t.
“We were revising our pricing matrix within our manufacturing division and realized that we did not have a good handle on our total cost of workforce, which is a factor in our pricing,” Stoskopf says.
His situation is not unique. While most HR professionals can tell you what their company spends on salaries and benefits, fewer know the full amount invested in human capital. Experts call it total cost of workforce (TCOW), a metric that may include a variety of labor costs such as recruiting, onboarding and training in addition to salaries and benefits. Phillips Screw Co. now includes all of these costs in its TCOW calculation, which Stoskopf can recite chapter and verse.
This type of number crunching has traditionally been the domain of the finance department alone. No longer. To get the most accurate and useful TCOW figures, finance and HR need to work together to compile and interpret results. And, experts say, this metric will become more important in the HR realm in years to come.
“At most companies, [workforce] is the biggest expense the company faces,” says Brian Kropp, practice leader of the human resource practice at CEB, a business management consultancy based in Arlington, Va. “There is more pressure to figure out how to drive top-line performance and manage costs. By paying people more or giving them more benefits, does that translate into better performance and outcomes? Neither [finance nor HR] can answer that alone.”
Step 1: Identify Your Goals
Step 2: Define Your Variables
Step 3: Present Your Case Wisely
Step 4: Repeat Regularly
More:
https://www.shrm.org/hr-today/news/hr-magazine/0617/Pages/how-to-calculate-total-cost-of-workforce.aspx
