Workforce Management: Definition, Strategies and Best Practices

Businesses today face the daunting task of ensuring they have the right talent to achieve their goals. Employers need to understand their employees’ skill sets and make certain they use them in the best way to maximize effectiveness. This is workforce management in a nutshell.

Though it might sound simple, customizing your workforce management strategy can be complex. But don’t worry, we’ll simplify it by exploring:

• what workforce management means and why it matters
• 10 key components of workforce management
• strategies, best practices and challenges for workforce management
• how to choose the right tech to automate tasks and decisions around workforce management

As Steve Boese, HR Technology Conference co-chair, puts it, “HR automation takes care of certain manual HR activities so we can concentrate on the bigger picture.”

What is workforce management?

Workforce management (WFM) is how organizations allocate people, skills and resources — through forecasting, scheduling, time and attendance, performance and compliance — to put the right people in the right roles at the right time. Done well, it raises productivity while controlling labor costs and compliance risk. A key part of WFM is understanding the skill availability within your existing workforce and then developing a strategy to hire for skills gaps.

For example, an in-home tech support company might assign three employees to every van with their own laptops, cables, tools and work phones. A car dealership may need to ensure it has four salespeople helping customers out in the lot, four more in the showroom and two financing specialists in the back office. And a fast-food restaurant may need to ensure it has at least three line cooks preparing food and two cashiers to serve dine-in and drive-thru customers.

It doesn’t matter if an employer provides a specific service or product. Ideally, effective workforce management should help them:

• be more efficient than the competition
• operate in a way that lends itself to sustainable business growth
• achieve positive outcomes by allocating the right talent in the right ways

The importance of workforce management

Workforce management matters because it directly affects four things every business is measured on: labor cost, compliance exposure, productivity and employee retention. More than just a strategy to consider, workforce management helps ensure organizations operate optimally without overwhelming or burning out their employees. Without it, employers could experience sharp declines in productivity and even slip further away from reaching their goals.

Keep these six reasons in mind for why you should always prioritize workforce management in your workplace.

1. Maintain compliance

In a world of predictive scheduling and strict PTO laws, workforce management holds the key to consistent compliance. Employers ensure their workforce management strategy addresses applicable rules and regulations.

For instance, if the state your employees work in provides guidance around how long an employee can work in a single shift, your workforce management strategy must consider it. Similarly, if your staff routinely uses heavy machinery, you’d want to ensure frequent breaks and transitions while maintaining production targets.

Verify with a licensed legal expert which local, state and federal laws could impact you. Afterward, ensure you plan for the right staffing levels and materials to limit your risk exposure. This can help your organization avoid untimely audits, costly fines and other penalties.

2. Minimized costs

At its heart, workforce management is about making the most out of what your business has. At the same time, it also needs to help prepare your organization for the future. This means hiring, scheduling, training and promoting employees in a way that keeps them invested and productive.

It takes a crucial balance that isn’t always obvious. Seasonal demands and other factors may influence what effective workforce management looks like for a certain period. In other words, to best minimize costs, workforce management needs to be fluid and adaptable.

3. Create smarter schedules

When done right, workforce management ensures an organization has the staff it needs at the exact times it needs them. But this is just as much about employees as it is their employers. For example, if unrealistic hours put too much pressure on top performers, it could risk burning them out. At the same time, a schedule should put developing employees into positions that encourage their growth.

Workforce management helps companies maintain that balance and create schedules that:

• address business goals
• operate within compliance
• encourage employees to focus and develop
• make the most out of finite resources

4. Staffing optimization

Like scheduling, proper workforce management should place employees in optimal positions based on their experience, capability and other factors relevant to the work they perform. For example, an industrial parts manufacturer may place new hires on teams with more seasoned employees to help close a generational skills gap. Or a small car repair shop may opt to have its most charismatic and personable mechanics handle conversations with customers.

The best workforce configuration will vary between businesses, but the goal should be the same: to ensure the best possible outcome for an employer and employees.

5. Workplace safety and standards

Effective workforce management is vital for ensuring a safe and compliant workplace. Poor scheduling on a construction site, for example, could lead to overworked employees who may hurt themselves or their co-workers. In a warehouse, letting a less experienced employee operate a forklift without supervision could produce disastrous consequences — not to mention several OSHA penalties. (Under OSHA, employers must provide a workplace free from serious recognized hazards.)

While an employer can’t foresee every incident, workforce management helps ensure they utilize the most skilled employees in the right way.

6. Efficient production

By placing every person in the right spot, workforce management ensures a business does what it does best. Take a customer service center, for example. With a fully staffed team and fast, functional technology, any trained employee should be able to efficiently assist clients without rushing. A resort that practices effective workforce management, on the other hand, should be able to easily give its guests an unforgettable experience with few inconveniences.

Every organization benefits from workforce management. The outcomes it serves may look different, but it should always contribute to a company’s growth and goals.

Key components of workforce management

A complete workforce management strategy spans 10 connected functions, from time and attendance through analytics, and each one feeds the others. Given that effective workforce management provides organizations widespread benefits, it makes sense that it’s made up of many equally relevant pieces. Let’s dive into 10 of the most common.

Time and attendance management

Workforce management isn’t possible without — you guessed it — a workforce. Making the most out of an employee’s time and attendance starts by ensuring they have logical shifts and are engaged enough to actually work them. And should an employee call in sick or take time off, workforce management should help you address their absence and keep operations running smoothly. If a company’s efficiency crumbles with one employee out, then it probably wasn’t managing its workforce effectively.

Workforce planning

Remember, workforce management isn’t a one-and-done process. It should focus just as much on the future as it does the present. Workforce planning pushes organizations to anticipate the employees they’ll need and fill those positions before openings disrupt business. This can involve:

• creating a new leadership position
• establishing a new team
• building a department entirely

Employee scheduling

Like time and attendance, strong scheduling is vital to workforce management, even when consistent schedules aren’t possible. Employees should have a clear line of sight into when they work, and that shift should allow them to perform their roles efficiently. For example, if you run a 24/7 emergency vet clinic, schedules should be equal across the entire day, not just what other businesses would consider normal working hours. At the same time, a retailer prepping for Black Friday may choose to schedule more employees on that day to help as many customers as possible. Scheduling — like workforce management itself — should pivot as needed.

For this purpose, consider software that automates decisions around employee time off based on your business and compliance requirements.

Performance management

Not every employee wants to stay in the same position forever. Careers require growth, and workforce management must always consider how to cultivate them. Focusing on and amplifying employee performance also helps organizations identify the future leaders a company needs and develop change management strategies.

And even for employees who don’t enter leadership, performance management helps ensure they continue to operate at a level fit for the business. While not immediately noticeable, stagnant skill sets slowly wear down a company’s efficiency.

Labor forecasting

No one can predict the future, but labor forecasting helps organizations prepare for it. This piece of workforce management involves assessing areas of need and addressing them early to prevent over- or understaffing. Businesses with peak seasons — like in hospitality and retail — should be familiar with this practice. All businesses should always keep the labor they could need top of mind to ensure their workforces don’t trail behind their needs.

Overtime management

Sometimes, overtime is unavoidable. But if an organization has a regular tendency to pay overtime, it could be from a lack of workforce management. Proper staffing and labor allocation are crucial to preventing burnout and reducing unnecessary costs, like regular overtime. Under the Fair Labor Standards Act, covered employees must receive overtime pay at no less than 1.5 times their regular rate after 40 hours in a workweek. Additionally, reducing overtime where possible could help improve your organization’s culture and produce higher efficiency.

Regulatory compliance

An overworked, poorly trained and understaffed workforce can easily push a business into noncompliance. Effective workforce management should always prioritize compliance and ensure an organization meets its minimum regulatory requirements. Addressing potential work hazards, maintaining professional certifications and avoiding labor law violations all play a huge part in preventing fines, audits and other penalties. At the same time, forward-thinking workforce management requires employers to monitor ongoing compliance trends and prepare a strategy to address them as needed.

Workforce optimization

Broadly, workforce optimization defines how employers:

• recruit the right candidates
• reduce costs
• increase productivity
• address client or customer needs
• generate revenue

This encompasses everything from hiring and advancement to evaluations and upskilling. Think of it as fine-tuning your staff so it operates at the highest possible level. Plus, through workforce optimization, organizations in competitive industries can stand apart from the rest.

Budgeting and forecasting

Linked to both staffing and resources, budgeting and forecasting help organizations determine the best investments for their future. If workforce management is an engine, consider a solid financial strategy its fuel. It allows a business to properly allocate funding for short- and long-term goals. Without properly anticipating needs and their associated costs, employers could face bottlenecks and roadblocks that derail productivity.

Analytics tracking

It may go without saying, but no organization can effectively manage its workforce if it doesn’t understand it. By collecting data and feedback about their people, such as on how they use their tech and what motivates them, employers have an invaluable opportunity to improve their employee experience and enhance workplace efficiency. In turn, analytics tracking can inform every other aspect of workforce management.

Workforce management strategies

No one approach to workforce management applies to every business. Keep these tips and strategies in mind as you refine your approach.

Make accurate workforce predictions

Understanding how your employees work is huge. But you should also direct that knowledge into your strategic planning. Take time to consider the areas of need for your workforce and how you can best address them. If you know your organization could benefit from a new team, craft a business case and determine what it would take to build it. As you solidify your predictions, keep realistic costs in mind so you know exactly when and how to make your next move, no matter what it is.

Overcome global workforce challenges

We don’t work in vacuums. External forces can impact your workforce just as easily as internal factors. Always pay attention to global trends and frequently ask yourself, “If my organization had to respond to this issue, what would we do?” Disaster recovery plans and regular workforce evaluations help keep employers proactive and avoid abrupt shifts. After all, when it comes to operating a business, it’s impossible to overprepare.

Monitor and optimize performance

The work an employee performs should never be in doubt. In other words, you should understand your organization’s roles and constantly look for ways to improve and optimize them. If a role or team has measurable goals to reach, keep tabs on how often they fall short of, meet and exceed them. Talk to your employees to determine what keeps them from doing their best work and be curious about how to help them focus and succeed.

Adapt to remote and hybrid workforces

If your business requires employees to work remotely or in hybrid settings, ensure you have the tools in place to monitor them. Their measurements of productivity should be just as clear as those of your on-site employees. And keep the unique compliance requirements that impact them in mind, especially if they work in a different state than where your business primarily operates.

Evolve and improve continuously

Your workforce management strategy should always evolve. After all, what may have worked a year ago may be ineffective for your organization’s current goals. Change is understandably tough, but resisting it could set your workforce behind and allow it to be surpassed by competitors. In many ways, “workforce management” could be considered “workforce maintenance.”

Best practices for effective workforce management

In addition to creating a solid strategy, you should also consider how to implement it. Let’s explore three ways to simplify and streamline workforce management.

1. Use data-driven decision-making

You should be able to justify every choice you make around your workforce. Ideally, you should rely on accurate and insightful data to guide your decisions. Of course, you’ll need sources for it, which is why it’s vital to analyze your workforce to identify what motivates and engages employees. The same is true for staffing needs and other meaningful changes. To put it simply, every action should have a clear and accessible “why.”

2. Implement workforce automation

The fewer manual tasks employees have to perform, the more they can invest their efforts into areas of need. Automation helps ensure employees don’t waste time — and by extension, resources — on tedious, repetitive tasks that could be completed electronically.

Self-service HR software provides a great example. Rather than remove themselves from their work to ask HR about adding a dependent or verifying their paycheck, the right tech lets employees do it themselves from the convenience of their phones. It may seem small, but that capability could save hours a year in productivity per employee.

According to a study conducted by Forrester Consulting on behalf of Paycom, a composite organization that used automated, single-database software cut payroll-processing labor by 90% and time spent correcting payroll errors by 85%.* And The Kraft Group, with its 20 businesses and 5,000 employees, reduced payroll preparation time by 75% after adopting automated payroll that runs in a single database.

3. Use workforce management software

From performance to labor allocation and beyond, the right tech helps streamline the most taxing and complicated aspects of workforce management. But not all software is created equal. Consider an option that’s easy to use and allows for the seamless flow of data between tools. A single database keeps time, scheduling and pay data consistent, so automation acts on one accurate source — reducing reentry and the errors that come from stitching systems together. That way, you can:

• ensure reliable reporting
• minimize reentry and errors
• automate common, high-volume decisions
• quickly and easily obtain the data you need to make decisions

Common challenges to workforce management

No organization operates in a perfect world. You’ll likely face obstacles that will make effective workforce management tough. Luckily, knowing what those are will give you a chance to get ahead. Let’s discuss three workforce management challenges you could face.

1. Employee turnover

You can’t manage a workforce that doesn’t exist. Frequent turnover makes it difficult to plan for the future, as you’ll likely redirect most of your efforts to just hiring the bare minimum number of employees. And without a consistent workforce, you may find it hard to advance or even just train your people.

If attrition is an issue, dig into why your most consistent employees stay and determine how to foster that in others. The solution could be easier to address than you think.

2. Scheduling conflicts

No employee can be everywhere at once. But unreasonable schedules and poorly thought-out shifts may try to convince you otherwise. While you should put your top performers in valuable positions, you also shouldn’t overwork or misappropriate their time. At the same time, your schedules should always consider a backup plan should an employee — or several employees — call in. If a schedule falls apart because of one absence, it likely had little consideration to begin with.

Additionally, stay aware of any scheduling laws that affect the places where you operate. In certain states, overscheduling or abruptly changing shifts for employees could lead to fines and other penalties.

3. Lack of workforce visibility and tracking

Remember, you can’t manage your workforce if you don’t understand it. Without tools to help you properly gauge productivity, it’ll be extremely difficult to figure out how to enhance it. With no insight, your workforce management strategy will be directionless. And without direction, it’s unlikely you’ll be confident that any decision is the right one.

4. Managing remote and hybrid teams

The more dispersed your workforce is, the harder it could be to effectively manage it. While not impossible, remote and hybrid settings can make it difficult to gauge engagement, investment and overall focus.

If your business requires any form of remote work, make sure to regularly check in on affected employees and gather their feedback. You should also find ways to measure their productivity and promote their performance. Ideally, physical distance shouldn’t create blank spots in your strategy, especially if remote settings are unavoidable in your line of work.

Choosing the right workforce management solution

The right workforce management software unifies scheduling, time, compliance and analytics in one database to automate frequent tasks and decisions scaling organizations face. Given how fundamental workforce management is to an employer, tech to help simplify it exists everywhere. Even so, that doesn’t make the right option obvious. Consider these four factors before purchasing any workforce management software.

1. Reporting capabilities

Perhaps one of the most important aspects of your tech is its ability to create consistent and reliable reports. Look for workforce management software that offers real-time reporting that proves the integrity of its data. For the best results, invest in tech that relies on a single database, which minimizes reentry and the chance for errors and disparate data. Across enterprise organizations, HR and payroll teams report using more than six HCM providers on average, and 91% say they’re interested in an automated, single-database solution.** After all, these reports will be crucial for labor forecasting, identifying trends and addressing areas of need.

2. Scalability

Workforce management software is only as valuable as its capacity for growth. If it can’t keep up with your organization as it expands, it’s likely not worth investing in at all. When speaking with a potential provider, ask them for case studies and testimonials from businesses in your industry. Even better, look for reviews from enterprises with exceptionally large workforces. If they respond positively to the software, it’s reasonable to believe the tech could be the right fit for your organization, too.

3. Compliance management

Given how important it is, you should always look for tech that helps simplify workforce compliance. Verify both the security standards of your workforce management software as well as the tools it offers to address your regulatory requirements. For example, software that automatically notifies employees and HR about soon-to-expire credentials can help you prevent penalties and other issues. And tech with extensive reporting capabilities could help you prepare for and address audits — even under short notice.

4. Employee experience

Ultimately, employees likely represent your largest investment. As such, your workforce management software should help you understand their expectations and enhance their experience. Like any software they use, your tech should be accessible and easy to navigate. At the same time, it should help you gather feedback and analyze how employees work so you can make the best possible decisions on their behalf.

For enterprise-scale requirements, see how Paycom serves large businesses.

Workforce Management: FAQ

What is workforce management in HR?

In HR, workforce management is the set of processes — like scheduling, time and attendance, labor forecasting, performance and compliance — used to deploy employees efficiently while meeting wage, hour and safety obligations.

What is a workforce management system?

A workforce management system is software that automates those processes. Ideally, it should use real-time data to forecast staffing needs, build compliant schedules, track time and attendance, report on labor and automate high-volume tasks and decisions in real time.

What does workforce management include?

Workforce management includes 10 core functions:

• time and attendance
• workforce planning
• scheduling
• performance management
• labor forecasting
• overtime management
• regulatory compliance
• workforce optimization
• budgeting and forecasting
• analytics

What’s the difference between workforce management and HCM?

Workforce management focuses on deploying and tracking labor. Human capital management (HCM) is broader and covers the full employee life cycle, with WFM serving as one major piece of HCM.

Why is workforce management important?

It helps control labor cost, reduce compliance exposure, improve productivity and support retention by giving employees fair, predictable schedules.

*A commissioned Total Economic Impact™ study conducted by Forrester Consulting on behalf of Paycom, June 2023. Results are for a composite organization representative of interviewed clients.

**A commissioned study conducted by Forrester Consulting on behalf of Paycom, May 2025.