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Labor Forecasting

by Alexandra Vazquez
Labor forecasting is the process of predicting future labor needs. Learn more about forecasting staffing needs, different prediction methods, and how to implement a unique strategy.

What is labor forecasting?

Labor forecasting, or workforce forecasting, predicts future labor needs using applicable company and market data. This practice helps companies balance customer demands and employee satisfaction by avoiding overstaffing and understaffing and scheduling labor hours to meet these needs. Overstaffing creates unnecessary costs and a potentially hostile competitive environment amongst employees. Understaffing can leave the company workforce feeling stressed out and customers feeling dissatisfied with the service. 

Some businesses use workforce management software to plan, manage, and track company personnel. Workforce management tools give companies the resources to predict future labor needs, plan employee schedules, monitor attendance, and track overall efficiency. These systems often integrate with other human resources software to provide a fully comprehensive view of every aspect of the workforce. Some solutions even offer capabilities for employees themselves to track their time progress and submit time off requests.

Labor forecasting methods

There are five labor forecasting approaches used to calculate expected demand and manage the company workforce accordingly. Each method is valid, but the best method for success may vary from company to company. 

1. Historical analysis

Companies use the historical analysis labor forecasting method to analyze previous labor data to predict future needs. This method identifies trends to give companies insight into when employees are needed most. Historical analysis heavily relies on the proper collection of performance data. This includes customer behavior, traffic, employee retention, and more. 

Reflection questions to ask when conducting a historical analysis:

  • Is there a specific time of the year when business is booming?
  • Is there a particular time of the year when business is slow?
  • Are there any external factors that have affected the target market in the past?

Some companies utilize demand planning software to convert historical data into practical labor forecasting next steps. Demand planning tools help companies collect raw company data, conduct analyses using automation, use those findings to foresee labor needs, get a deeper understanding of future customer demand, and prepare for expected changes in advance.

2. Research 

The research labor forecasting method entails extensive market research into common workforce trends in the industry. Looking to competitors can be a strong advantage when it comes to market research. Companies should consider their peers’ hiring methods and how they react to industry fluctuations and changes in demand. 

Reflection questions to ask when conducting market research:

  • What external factors affect the company’s industry?
  • How are similar companies handling labor management?
  • Are there any geographical elements that affect traffic?

3. Delphi


The Delphi labor forecasting method involves anonymous surveys about a company’s current workforce and foreseeable needs. These surveys are answered by company leadership and decision makers. These decision makers will help create a consensus on different elements of the workforce and influence labor forecasting judgments.

Reflection questions to ask when conducting Delphi method surveys:

  • Are the current labor workforce processes effective?
  • Will decision makers be more honest on an anonymous survey?

4. Advanced quantitative techniques


The advanced quantitative techniques labor forecasting method uses historical data to predict future trends. What makes it different from the historical analysis is the techniques used to convert and interpret that data. 

  • Regression analysis uses statistical equations to estimate how different variables affect elements of a company’s workforce. It can also identify trends in individual employee performance and hiring behavior. 
  • Linear programming helps companies figure out how to allocate existing labor resources effectively. It can also help determine what is missing in regards to current processes.
  • Data mining takes vast sets of historical data and makes them more digestible using automation. 

5. Managerial assessments


The managerial assessments labor forecasting method relies on company leadership’s understanding of labor capabilities and needs. This is all under the impression that these leaders have a more personal role in the company and can make more effective judgments. For this method, companies will use the opinions of the managerial teams to make decisions regarding what workforce processes are lacking and what future labor requirements will look like. 

Benefits of labor forecasting

There are many benefits to preparing for future labor needs ahead of time. Forecasting labor demand gives companies the tools to preemptively avoid workforce issues and prepare for upcoming challenges and needs. 

  • Understand current capabilities by getting a comprehensive view on how labor processes are currently working and where they are not.
  • Improve customer satisfaction by having a staff that is fully capable of offering optimal customer service. 
  • Create a positive work environment and prevent employee burnout by avoiding overstaffing or understaffing.
  • Promote employee retention by creating a space where employees are working ethically and to their full potential. 
  • Make better hiring decisions by knowing exactly what is needed and optimizing the recruitment process. 

How to implement a labor forecasting strategy

Each company’s labor forecasting process may look different. Creating a customized strategy relies on some significant reflection and decision making.

How to Implement a Labor Forecasting Strategy

  • Define company key performance indicators (KPIs). Recognize the KPIs and major objectives of the company in general, as well as employee performance goals.
  • Examine the current workforce. Analyze the company’s current labor processes. This includes collecting data on different demographics, a balance of full-time and part-time employees, and how they are fulfilling expectations. Companies should also monitor any apparent issues. 
  • Consider a forecasting method. Explore the different forecasting methods and consider which is the most aligned with prediction goals and current capabilities. 
  • Identify gaps. Analyze the labor forecast data and compare it to the way things are currently handled. Recognize gaps in the way things are and what will be needed in the future. 
  • Determine future needs. Decide what will be needed in the future to address existing issues.
  • Fill gaps. Create a strategy with the next steps for filling any gaps in the workforce objectives. This may include a plan for recruitment and/or reduction.
Alexandra Vazquez
AV

Alexandra Vazquez

Alexandra Vazquez is a Senior Content Marketing Specialist at G2. She received her Business Administration degree from Florida International University and is a published playwright. Alexandra's expertise lies in writing for the Supply Chain and Commerce personas, with articles focusing on topics such as demand planning, inventory management, consumer behavior, and business forecasting. In her spare time, she enjoys collecting board games, playing karaoke, and watching trashy reality TV.

Labor Forecasting Software

This list shows the top software that mention labor forecasting most on G2.

Employee Scheduling Software, Time Clocking, HR & Payroll

Sisense is an end-to-end business analytics software that enables users to easily prepare and analyze complex data, covering the full scope of analysis from data integration to visualization.

Replicon is a cloud-based time tracking and expense system.

OnePoint is built on one database and one employee record, giving HR administrators a platform to manage Payroll, Human Resources, and Time and Labor, including advanced features for Recruitment/ATS, Benefit Enrollment, Leave Management, ACA compliance, scheduling and much more.

Arcoro is a powerful Internet-based Human Resource Management System (HRMS) that provides for extensive automation of all HR-related activities.

Quinyx's web-based workforce management application is designed to combine powerful planning and forecasting features with communication and interaction for both employees and employers.

ChartHop is a dynamic People Operations Platform that connects and visualizes all your people data to empower your organization through insights, alignment, and action.

An industry-leading visitor management solution, providing for the full visitor lifecycle while delivering a single view of visitors to multiple locations across an organisation. When planning for and welcoming visitors and guests, TDS Visitor manages the full visitor lifecycle end-to-end, from pre-registration and self-service checking-in to notifying hosts of visitor arrivals and checking out, ensuring all appropriate health, safety and legal requirements are met.

We are a people planning and analytics software that helps start ups and mid size companies: - Take control of headcount spend through real time, visual compensation data - Create headcount plans and scenarios in a visual way - Turn headcount plans into scenarios through one easy click - Overlay compensation, performance and other people data on top of org charts We integrate with 30+ existing HRIS and ATS systems as well as spreadsheets to give you one integrated view of all your people data.