Workforce management (WFM) involves applying strategic optimization to human resources, including employees and non-payroll workers like, independent contractors and freelancers. The goal is to ensure staff have all required resources where and when they work and that qualified staff members are available to meet job requirements.
What is Workforce Management (WFM)?
Workforce management is similar to workforce planning and workforce optimization. A workforce management strategy typically includes forecasting, scheduling, skills management, attendance, timekeeping, employee empowerment, and day-to-day management.
Why Is Workforce Management Important?
Workforce management helps organizations assign the relevant workforce to perform the most suitable job, at the right place and time. It involves techniques like forecasting, scheduling, and employee management to decrease operational costs, increase employee productivity and engagement, and ensure compliance with legislative, industry, and market conditions.
Workforce management can help track hourly employees, measure absences, and create feedback mechanisms for personnel working remotely. Additionally, workforce management software can ensure compliance with capacity restrictions and help keep personnel and customers safe.
Types of Workers
Full Time Employee
Full-time employees typically work an average of 40 hours per week and are entitled to benefits such as health, dental, vacation and paid leave. An employment contract is usually provided by the employer which describes the employee’s responsibilities, scope of services (hours and days worked), benefits provided, terms of retirement, notices, and reference to applicable laws.
Part Time Employee
A part-time employee is an individual who works less than 40 hours per week and is usually paid hourly rather than globally. These employees are still considered legal employees of the company, but may not be eligible for some or all of the benefits of a full time employee.
Seasonal employees are employees who are hired according to the company’s seasonal needs. For example, a restaurant may employ seasonal employees to handle business growth during peak seasons. This type of employee is not considered a full-time employee and is therefore eligible for Social Security and unemployment benefits.
Temporary workers (also called temps) are employees who are hired for a specified period of time, often six months, or for a specific project. In some cases they might be employed temporarily by a company, or hired via a staffing agency. In the latter case, the staffing agency is typically the employer of the temporary worker.
Non-payroll workers, also called independent contractors or freelancers are self-employed individuals, or legal entities such as private companies, who work for another person or legal entity on a contract basis.
Companies or individuals using the services of freelancers are not required to provide employment benefits, such as health insurance, paid leave, or employer-provided severance pay. The payer must correctly classify each payee as an independent contractor or employee to understand their legal obligations—this is known as employee classification.
Learn more in the detailed guides to:
Modern workforce management relies on software and automation to manage large-scale human resources operations. Human resources technology (HR technology) is a broad term that applies to various software and hardware that automate HR tasks. Here are key HR technology solutions.
Workforce Management System
A workforce management system helps organizations gain insight into operational and business metrics. These systems streamline workforce management processes and steps and perform real-time data collection to facilitate monitoring and analytics. This information helps gain insight into the capabilities of each team member and assess the performance of individuals.
Workforce Management Software Capabilities
Here are key capabilities of workforce management software:
Time tracking enables organizations to analyze efficiency and identify patterns. It helps track future workload, delegate tasks correctly, and hire an accurate number of team members. In addition to providing insights for leaders and managers, time tracking can improve the time management skills of individual employees, helping them create a productive daily routine autonomously and flexibly.
Forecasting and Budgeting
Forecasting and scheduling staffing needs enable organizations to create an effective workforce management process that provides a work-life balance. Scheduling responsibilities typically include managing staff scheduling, forecasting for team growth, and solving understaffing or overstaffing issues.
Scheduling can be a complex and time-consuming endeavor when performed manually. Artificial intelligence (AI) can automate scheduling tasks and analyze historical data to forecast future outcomes. It helps ensure organizations have the right number of employees, plan for staffing growth, and properly manage the team’s workload to prevent burnout.
Employee Performance Management
Workforce management systems provide organizations with insight into employee engagement levels to determine what drives employee productivity. It helps learn how each staff member works to help reward members that exceed expectations in a way that aligns with what they value most.
Independent contractor management is the practice of managing outsourced work performed on behalf of companies. Contractor management is a system for managing contractor health and safety information, insurance information, training programs, and other documents related to contractors and owners of the contract within the organization.
Managing contractors in a large organization requires effective use of contract management software, which can help standardize contract policies, grant visibility over contract terms, and assist with interfaces between multiple parties involved in a contract.
Learn more in the detailed guides to:
Employee Agreement Management
A labor contract is a document used to form a relationship between an employee and an employer, which specifies the rights, responsibilities and obligations of both parties during employment.
It is very important to proactively manage employee contracts and ensure compliance with terms, obligations, and relevant laws. Avoiding contract breaches is one of the main responsibilities of HR departments. Employee contract management solutions simplify this process, enabling central control over employee contracts and automation of manual tasks related to contract signing and renewal.
A training program is critical for building a successful workforce. Ideally, organizations should create training materials for onboarding new members and materials to facilitate continued development and growth.
Training materials typically include onboarding materials, external educational resources, tool management support, and industry news. Organizations should organize training materials in a shared space, like a digital tool or a shared folder that enables all team members to find information easily.
Workforce management systems can help organizations track compliance with state, federal, and local employment laws. It often involves tracking required training and certifications for specific roles, labor standards, missed breaks, union agreements, and family or sick leave requirements.
Payroll and Benefits Administration
A workforce management system can help track overall payroll and benefits, including day-to-day pay and benefits and additional incentives. For example, these capabilities enable organizations to analyze labor costs, track timesheets, track paid time off (PTO), offer employee incentives, and process paychecks.
Learn more in the detailed guide to global payroll
Vacation and Leave Planning
A workforce management system enables organizations to track staffing levels and handle time-off requests and approvals. Automation and data analysis capabilities help manage and track leave balances, absences, paid time off (PTO), time-off calendars, banked time, and schedule conflicts.
Learn more in the detailed guide to Human Resource Information Systems (HRIS)
Compensation Management: Paying Employees and Contractors
Compensation management helps organizations determine appropriate pay and benefits for employees and contractors. It involves using financial and non-monetary benefits to reduce turnover, attract recruits, boost employee engagement, and spur performance.
HR professionals employ compensation management for employee retention and talent management. The goal is to ensure salaries and bonuses remain competitive and benefits change according to the workforce’s needs.
HR professionals employ data to implement compensation management and understand the complexities of benefits administration. They collect and analyze the relevant information, including external and internal salary figures economic and demographic statistics.
Here is how organizations can employ compensation management:
- Monitor budgets—compensation data helps organizations prepare and monitor budgets and plan a compensation strategy.
- Comply with pay equity laws—these laws require organizations to report employee wages alongside data on race, gender, occupational role, and ethnicity. US states, like California in 2021, use this information to identify wage patterns that indicate discrimination. Additionally, starting in 2020, the US Securities and Exchange Commission requires firms to report human capital metrics, like pay equity.
- Diversity, equity, and inclusion (DEI)—compensation management helps address inequity issues to support DEI efforts.
- Manage freelancer payments—ensure freelancers are classified correctly as part of the workforce and paid in line with regulations in their country or region.
Learn more in the detailed guides to:
Recruitment and Talent Management
Talent management involves recruiting, evaluating, and compensating employees. Talent management software typically consists of integrated modules for onboarding and recruitment, learning and growth, compensation management, succession planning, and performance management. Recruitment involves evaluating candidates’ pre-interview and tracking them across the hiring cycle.
Learn more in the detailed guide to HR recruitment process
Traditionally, performance management was carried out using annual job reviews. However, modern practices automate this process to achieve continuous monitoring of job performance. Organizations can use separate performance management platforms or modules within existing HCM systems.
It often involves applying workforce analytics to individual performance management and skills. The insights gained from this process help optimize the allocation and improvement of human capital and identify any needs for new positions and departments.
Learn more about these and other technologies in the guide to HR technology
Human resources key performance indicators (HR KPIs) are metrics used to determine how HR is contributing to the rest of the organization. They measure how successful an HR department is in achieving its goals.
HR KPIs should follow the organization’s overall strategy, reflecting the performance of the HR organization in terms of the achievement of specific business objectives. These business goals are usually defined using a Balanced Scorecard (a management tool that uses four perspectives to define business objectives—financial, customers, internal, and learning/growth).
Every organization has different business objectives, and thus every organization should have unique HR metrics. Here are some example KPIs that your organization could measure:
- Absence rate and cost—an organization’s rate of absenteeism is usually calculated as the number of days employees are absent from work divided by the total number of days worked. Absence from work has multiple costs in terms of employee salaries, management costs, and replacement costs.
- Employee productivity rate—measures the contribution of human capital to the business. It can be tricky to measure, but might reflect speed, accuracy, or other quality aspects of an employee’s work.
- Internal promotion rate—the number of senior positions achieved through internal promotions divided by the total number of senior positions recruited. Internal hiring is generally faster and more effective. The ability to promote internal employees shows the organization is building high quality human capital.
- Number of Full Time Employees (FTE)—measures how all employees as a group translate to an equivalent number of full-time employees (regardless of the overall headcount, types of employees, or the number of hours each employee works). Learn more in the detailed guide to Full Time Equivalent.
- Employee satisfaction index—measures how employees perceive the workplace and how satisfied they are with their position. This is typically measured through employee attitude and engagement surveys.
- Employee innovation index—measures the degree to which employees are willing and able to try new approaches and ideas in the workplace. This too is commonly measured by attitude surveys. Innovation is especially important in the technology and scientific research, but is becoming a focus for virtually all industries.
- Net Promoter Score (NPS)—when applied to HR, NPS measures how likely employees are to recommend their company as a workplace to others. This can indicate employee satisfaction and the organization’s ability to attract talent.
Best Practices for Workforce Management
Here are some best practices you can follow to improve the effectiveness of workforce management.
Optimize Employee Onboarding and Offboarding
Employee onboarding and offboarding are two key HR activities that are becoming increasingly important to most organizations:
- Onboarding starts when a job seeker agrees to a job and includes all the steps needed to allow the new employees to become productive in their role.
- Offboarding is the process of terminating an individual’s employment and managing their separation. from the company. This may include processes for sharing knowledge with other employees and security aspects like revoking previous permissions.
These processes are gaining more importance due to the retirement of the baby boomer generation, and the entry of millennial employees into the workforce, who have a higher tendency to move between jobs.
Use talent management software to make onboarding and offboarding more efficient and effective. These solutions include special components that support onboarding and offboarding. These processes are technically similar, because both involve issuance or revocation of access and IT equipment, legal documents, and activities related to salaries and financial payments.
Learn more in the detailed guide to onboarding
Invest in Continuous Education and Training
Ensure training is tailored to an employee’s job. In time-intensive businesses like retail, manufacturing, or healthcare, it is often impractical to invite employees to a training course of several days or weeks.
The modern approach to employee training is to create bite-size educational content, such as 10-minute videos explaining key aspects of the job. These training materials can be consumed by employees on an ongoing basis. You can measure the value of training by observing the connection between training activity and sales revenue, service levels, or other metrics reflecting employee effectiveness.
Perform a Skills Gap Analysis
Skills Gap Analysis is a tool used to assess the gap between the current state of an employee’s skills and a future target state. Organizations use it to identify the skills an individual employee needs, but do not necessarily have to do their job effectively.
For HR, skill gap analysis is a method of finding the skills and knowledge that an organization’s employees lack. This information can help HR fill the skills gap by activities like:
- Skill upgrades
- Skill reorganization
- Developing successors and mentorships
- Investing in learning and development (L&D) initiatives
Learn more in the detailed guide to skills gap
Collect Quality Data
Workforce management relies on historical data to predict future patterns. The more data the system has to process, the more accurate these predictions will be. By integrating workforce management software with data from other business systems such as ERP and CRM, companies can better understand the requirements for HR resources.
For example, timesheet data and information showing actual sales from point-of-sale (POS) systems can help companies optimize schedules and staff allocations and reduce operating costs. In a project-oriented business, tracking hours spent on projects vs. project revenue and other metrics can help optimize staffing over time.
Set Up Robust Time Tracking Systems
Improved access to employee time logs enables businesses to measure productivity, workforce utilization, and track metrics to ensure compliance. It is important to deploy self-service time reporting systems and automated time capture, to reduce data errors and make reporting convenient for employees. This can allow managers to easily track, monitor, and respond to absenteeism.
Robust time tracking systems not only reduce payroll errors, but also help manage and reduce paid overtime, which can be significant for HR expenditure. In addition, high quality time logs can help organizations comply with regulations such as the Family and Medical Leave Act (FMLA) and the Fair Labor Standards Act (FLSA).
Improve Company Culture
Company culture has a huge impact on a company’s business results, and just as important, on employee satisfaction and the organization’s ability to attract talent. Organizations can define their desired culture in different ways, and HR leaders have a key role in this process.
HR departments can support a positive company culture in the following ways:
- Supporting continuous learning and skill development
- Setting up equitable performance management
- Providing options for coaching or mentorship to support employee development
- Facilitating collaboration
- Setting up programs for employee recognition
Learn more in the detailed guide to company culture
The Future Workforce
One of the challenges of workforce management is adapting to the massive changes occurring in the global workforce. These changes include the emergence of the gig economy, on-demand employees, and alternative workplaces.
Learn more these and other trends in the detailed guide to future workforce
Remote Work and Alternative Workplaces
Alternative workplaces are emerging that serve as a replacement for the traditional office work environment. Their development of alternative workplaces has been accelerated by several global trends, such as the massive growth of the Internet, cloud computing, the prevalence of smart mobile devices, and perhaps most significantly the COVID-19 pandemic.
Alternative workplaces include:
- Shared offices and coworking spaces
- Virtual communities
The concept of alternative workplaces emerged in the late 1990s, focusing on alternatives to working in an office. Today, the concept has evolved to focus on environments, both physical and virtual, in which employees work and how those environments support them. This support can include facilities like furniture and physical workspace, technology such as computers and Internet connectivity, and additional aspects like the ability to collaborate remotely with colleagues.
Alternative workspaces, by definition, grant more freedom and autonomy to workers compared to a traditional work environment. They break the link between work and a single physical location, but might also allow workers to choose the tasks they work on and their work method to provide the most value to an employer.
Many companies are investing in alternative workplaces. The advantages to an employer include:
- Improving employee job satisfaction
- Making a company more attractive to employees where talent is scarce
- Improving employee productivity
- Improving workplace culture
Learn more in the detailed guide to remote employee management (coming soon)
The Gig Economy
The gig economy is a free market system where organizations hire independent workers for short-term commitments. The term “gig” is slang for a temporary work assignment. The gig economy is part of a changing business environment that includes the sharing economy, gift economy, and barter economy.
Examples of gig jobs include freelancers, independent contractors, project-based workers, and temporary or part-time jobs. Gig apps and websites are often used to connect clients and gig workers.
Learn more in the detailed guide to the gig economy (coming soon)
On-demand employment is not a new concept, but it has grown in popularity in recent years.
An on-demand employee is a person who works in a company only when needed. This includes contingent workers, freelancers and daily work.
Depending on the industry, there might be several ways to hire on-demand staff:
- Temp workers
- Freelance workers
- Day laborers
On-demand workforces are becoming increasingly popular with businesses that need flexible schedules and staffing for specific projects. On-demand employees can be salaried employees of the company they work for, but are often self-employed or employed by one organization that delivers their services to another organization.
Hiring on demand has many advantages for both employers and employees. These include rapid hiring, more flexibility to respond to changing loads and business requirements, freedom to choose workers for specific tasks, reduced hiring risk, and the ability to test employees before a permanent hire.