Q3 workforce activity dips initially for a seasonal summer slowdown, though improvements throughout the quarter suggest a steady Q4.

Table of Contents

1. Introduction
2. Key Findings
3. Data Sources & Methodology
4. Top Trends in Q3 ‘23
5. Decrease in Shifts Worked
6. Slower Decline in Labor Participation Rate in the Overall Economy
7. Continued Strength in Healthcare Sector
8. Dip and Recovery in Public Sector
9. Slowdown in Retail and Hospitality
10. Workforce Activity for Small Companies Uneven
11. Shift Recovery Strength for Nearly All Companies
12. Manufacturing Sector Sees Better Shift Growth
13. What to Expect in Q4 2023

Introduction

Following the surprising strength in workforce activity in Q2, Q3’s labor rates started off slightly slower, though late-quarter improvements left the period steady overall. 

The slowing decline in the labor participation rate this year compared to last has been an overarching theme throughout the past few periods. Q3 continued this trend, finally hitting an inflection point at the end of the period to represent not just a slower decline, but a growing labor participation rate compared to the same period in ‘22. 

Though a large majority of sectors and company sizes experienced improvements in workforce activity as the quarter progressed, shift growth declined overall for the period. As you will see in the data below, shift growth and workforce activity for small businesses continue to lag behind the performance of larger companies. Since small companies make up the majority of businesses in the country, this could account for the shift work decline in Q3. 

Overall, much of the data from Q3 shows a continuation of trends seen so far in 2023 or regular slowdowns for the summer season. Going into a busy Q4, the Q3 workforce activity levels signal stability for the labor market, especially amid ongoing recession uncertainty. 

Key Findings

1. September 2023 is the first month indicating a growing labor participation rate since March 2022
2. Continued strength for companies of nearly all sizes, except small companies 
3. Workforce activity growth in the healthcare sector outpaces all others
4. Slowdown in the retail and hospitality sector going into the Q4 holiday season

Data Sources & Methodology

To complete our analysis of the state of workforce activity in Q3 2023, Paypro compiles data gathered by UKG, a leading HCM cloud provider. 

We assessed their monthly workforce activity reports from July through September of 2023 to uncover ongoing trends in workforce activity in Q3 that HR and finance executives should be aware of: 

• UKG Workforce Activity Report – July 2023
• UKG Workforce Activity Report – August 2023
• UKG Workforce Activity Report – September 2023

Throughout this report, all metrics reported are derived directly from the above reports. 

In these reports and as we present our own findings, you should be aware of a few key terms to better understand the data:

• Workforce Activity: a comprehensive term describing the current state of labor and employment outlook in the United States, based on factors like the number of shifts worked by employees and pay statements
• UKG Workforce Recovery Index: a rolling 12-month scale created by UKG that measures the level of workforce activity relative to the same month one year ago
• The index tracks workforce activity levels of 4.2 million employees across more than 35,000 businesses across the United States
• The index offers directional insight into the anticipated changes in the labor participation rate (e.g. if the index is <100% then the labor participation rate is shrinking compared to last year’s levels, it if is >100% it is growing)
• Shifts Worked: a total that is derived from aggregated employee time and attendance data, this metric reflects the number of times that employees “clock in” and “clock out” via a time tracking system at the beginning and end of each shift
• Shift Recovery: reflects month-over-month shift growth for a company or industry, as measured by time punches

Top Workforce Trends in Q3 ‘23

Shifts worked declined for the period overall, though many sectors, regions, and company sizes saw continued improvements over the Q3. 

Continued lagging metrics for smaller companies appear to weigh on the overall shift work growth for the economy, as you will see in further detail below. 

Another bright spot for Q3 was an inflection point for labor participation rate growth, which occurred in September. As you continue reading below, we’ll discuss the top trends we observed in US workforce activity during Q3. 

1. Decrease in Shifts Worked

Workforce activity dipped in July for the first time this year since April 2023, showing a bit of a slowdown following a surprisingly strong Q2. August workforce activity was down slightly from July, though September workforce activity rebounded to positive growth. 

Though the quarter ended on a positive note, there was still an overall decline in shifts worked for Q3. The slight decline in August 2023 is also similar to the decline that was seen in August 2022, signaling a normal pattern to end off the summer season. 

Here is a breakdown of the workforce activity data for the quarter: 

• July: -0.7%
• August: -0.8%
• September: +0.1%

Q2 had a positive shift work growth of +0.4% but was followed by a tighter Q3 which saw a decrease of -0.5% overall. This shows that there were fewer shifts worked across the economy throughout the quarter. 

The decrease in shifts worked in July sparked some concern; however, more stable activity towards the end of the quarter leaves experts feeling optimistic for the time being as recessionary fears still linger. 

2. Slower Decline in Labor Participation Rate in the Overall Economy

Continuing on the strength of Q2, Q3 ‘23 data signaled a slower decline in the labor participation rate compared to the previous year. 

Industry experts focus on the labor participation rate to measure the portion of the population over the age of 15 that is actively working or looking for work. This metric includes people who are unemployed, but are still seeking out employment. But, it excludes unemployed individuals who have stopped looking for work. 

Thus, slower declines in the labor participation rate may not necessarily signal that more people have found jobs. But, it may show that more people who have previously given up looking for work or left the labor market are re-entering and seeking out jobs again. 

The UKG Workforce Recovery Index is a directional indicator of the changes in labor participation in the United States. The year-over-year improvement shown in Q3 is what indicates a slower decline in the labor participation rate than a year ago, as seen below.  

• Q3 ‘22: 96.9%
• Q3 ‘23: 99.4%

The index has shown both year-over-year and quarter-over-quarter improvements, with the index in Q2 ‘23 at 98.3%. 

We have yet to see an inflection point with the index >100 for an entire quarter this year, and the help from the holiday rush in Q4 could be the key component to seeing this occur. 

Aside from the year-over-year and quarter-over-quarter improvements, the index gradually improved throughout Q3 and finally reached an inflection point in September, as shown in the monthly data below. 

• July: 98.4%
• August: 99.2%
• September: 100.6%

September 2023 is the first month with an index >100 since March 2022. On a monthly basis, this signals a total rebound and growth in the labor participation rate. Hitting this inflection point at the end of Q3 is a meaningful milestone, and could be signaling a strong rest of the year for labor participation. 

3. Continued Strength in Healthcare Sector

The strength in workforce activity for the healthcare sector in Q2 has continued throughout Q3, outpacing all other sectors. 

While the sector showed a meaningful rebound in workforce activity during the second quarter, we can now see that this strength was not transitory, as seen in the overall improvements to the UKG Workforce Recovery Index for the sector again throughout Q3: 

• July: 109.2%

• August: 102.3%
• September: 118.8%

Though there was a slight slowdown in growth in August, September showed meaningful improvements, indicating greater workforce activity overall in Q3 ‘23 compared to Q3 ‘22. 

From the above data, we can see that workforce activity levels have improved both quarter-over-quarter and year-over-year, showing remarkable labor market strength across the sector. 

4. Dip and Recovery in Public Sector

The public sector saw a rebound in workforce activity mid-Q2, though activity shrank and then rebounded again at the end of Q3 to better levels than in 2022.

As a reminder, the public sector refers to public government roles as well as employment in public K-12 education and public higher education. This could help explain why workforce activity for the sector dropped during the summer months. 

Here is the data for the UKG Workforce Recovery Index for the sector throughout the third quarter: 

• July: 92.6%
• August: 97.2%
• September: 108.6%

Again, index values >100 indicate year-over-year growth in workforce activity. From this, we can gather that July and August ‘23 workforce activity levels shrunk from the same months in 2022, though rebounded in September 2023 quite a bit, likely as the school year got into full swing. 

5. Slowdown in Retail and Hospitality

Workforce activity in retail and hospitality has had slowing growth for the fourth consecutive month. By the end of Q3, workforce activity for the sector actually showed a decline from last year’s levels in September ‘22. 

Not all sectors saw resounding strength throughout the quarter like healthcare. However, the continued slowdown in workforce activity in retail and hospitality could signal an overall cooling throughout the sector while others remain stable or growing. 

Here is what the UKG Workforce Recovery Index looked like for the retail and hospitality sector throughout the third quarter of 2023:

• July: 101.3%
• August: 101%
• September: 99.9%

Growth in workforce activity for the sector was already slowing at the start of the quarter, though by September, we see 2023 levels shrinking from those in September ‘22 with an index value <100. 

The Q4 holiday season generally has a positive impact on workforce activity in the sector. But in the meantime, we can use the index data to determine that there may be a shrinking labor participation rate across retail and hospitality. 

6. Workforce Activity for Small Companies Uneven

In Q2, one of the persistent weak areas in workforce activity was small companies with less than 100 employees. In Q3, this remains unchanged. 

Q3 data for small companies showed slower declines overall compared to Q2. However, as we reported last quarter, they still have not hit an inflection point during this recovery period. 

The UKG Workforce Recovery Index for companies with less than 100 employees was still below 100, indicating lower labor participation rates in Q3 ‘23 compared to Q3 ‘22. 

• July: 96%
• August: 99.2%
• September: 95.8%

The third quarter started relatively unchanged from the end of Q2, with some improvements shown mid-quarter nearing an inflection point, which dropped down again in September to end the period. 

Even though there was a quarter-over-quarter improvement for smaller companies, the data still shows lower levels than Q3 ‘22, signaling a slower recovery than larger companies. 

7. Shift Recovery Strength for Nearly All Companies

Similar to what we saw in Q2, shift recovery data remained strong or improved across Q3 for nearly all companies except those with less than 500 employees. 

Shift recovery for large companies with >2,500 employees has strengthened throughout the entire year, and Q3 is no different. 

Here is some of the supporting shift recovery data for each month in Q3 by company size: 

The above data represents month-over-month shift growth as measured by time punches, with each sized company ending the quarter with positive growth, minus the smaller companies. 

This trend continues on what we’ve seen so far this year. The ongoing strength of larger companies may shed light on what is still to come for smaller companies that are having a slower recovery. 

8. Manufacturing Sector Sees Better Shift Growth 

There was a decline in shift growth for the manufacturing sector to start off Q3, though this improved throughout the quarter and ended on a high note. This follows a similar pattern to what we saw for the sector in Q2, which also ended the period with positive shift recovery despite early quarter contractions. 

Here is the Q3 shift recovery data for the manufacturing sector: 

• July: -0.9%
• August: -0.6%
• September: +0.9%

The above data shows the sector ended Q2 with positive month-over-month shift growth, even after an apparent slowdown in July and August. 

Following muted growth over the summer, the shifts worked in the manufacturing sector are growing as we head into the rest of 2023. Q4 tends to be a busy time of year for most sectors, which should be no different for manufacturing as the sector builds off the momentum seen at the end of Q3.

What to Expect in Q4 2023

Many areas of the US economy saw both quarter-over-quarter and year-over-year improvements in workforce activity in Q3, despite early quarter slowdowns. Ongoing labor strikes appear to have had minimal impact, and the momentum going into Q4 for much of the economy signals stability for the labor market amid continued talk of a looming recession.

During the last quarter of 2023, HR and finance executives can watch out for the following trends to inform their hiring and workforce planning within their organizations: 

• Holiday season strength: Q4 is a busy season for many sectors of the economy with the holidays approaching, which should support continued positive shift recovery across the US economy to end off the year. Specifically, the retail and hospitality sector could benefit the most following a slowdown in Q3.
• Rebound in workforce activity levels for small companies: We are still waiting for shift recovery and workforce activity levels for small companies to mirror that of larger companies. The holiday season could make it possible for this inflection point to occur before 2023 ends, which would have positive ripple effects throughout the entire economy. 
• Growth in labor participation rate: The UKG Workforce Recovery Index finally reached an inflection point in September, though we have yet to see an entire quarter with an index >100 this year. The Q4 holiday push could make this possible, signaling a growing labor participation rate compared to Q4 ‘22. 

Q2 workforce activity shows labor market resiliency, with most sectors, company sizes, and regions showing y/y and q/q improvements.

Table of Contents

1. Introduction
2. Key Findings
3. Data Sources & Methodology
4. Top Trends in Q1 ‘23
5. Increase in Shifts Worked
6. Slower Decline in Labor Participation Rate in the Overall Economy
7. Rebound in Healthcare Sector
8. Rebound in Public Sector
9. Rebound in the Northeast
10. Workforce Activity for Small Companies Still Below ‘22 Levels
11. Shift Recovery Strength for Nearly All Companies
12. Manufacturing and Services & Distribution Sectors See Better Shift Growth

Introduction

The year for workforce activity had a strong start in Q1 though levels eased as the period progressed. However, in Q2, there was widespread strength across the economy, represented by the metrics we will discuss below.

While cooling workforce activity levels at the end of Q1 appeared to signal continued trends throughout Q2, the actual results have shown surprising resiliency and better workforce activity than expected. Thus, the weakness seen at the end of Q1 did not persist throughout the second quarter.

Overall, it has been a better-than-expected start to 2023, especially as strong recessionary fears dominated the narrative for the first half of the year. The strength shown in Q2 was not only better than Q1 levels but better than Q2 ‘22 levels in many areas as well.

Key Findings

1. Strongest start to Q2 shift work since pre-pandemic (2019)
2. Improving Workforce Recovery Index y/y signifies a growing labor participation rate in Q2
3. Strength for companies of nearly all sizes, except small companies with <100 employees
4. All sectors end Q2 with positive shift growth

Data Sources & Methodology

To complete our analysis of the state of workforce activity in Q2 2023, Paypro compiles data gathered by UKG, a leading HCM cloud provider.

We assessed their monthly workforce activity reports from April through June of 2023 to uncover ongoing trends in workforce activity in Q2 that HR and finance executives should be aware of:

• UKG Workforce Activity Report – April 2023
• UKG Workforce Activity Report – May 2023
• UKG Workforce Activity Report – June 2023

Throughout this report, all metrics reported are derived directly from the above reports.

In these reports and as we present our own findings, you should be aware of a few key terms to better understand the data:

• Workforce Activity: a comprehensive term describing the current state of labor and employment outlook in the United States, based on factors like the number of shifts worked by employees and pay statements
• UKG Workforce Recovery Index: a rolling 12-month scale created by UKG that measures the level of workforce activity relative to the same month one year ago
• The index tracks workforce activity levels of 4.2 million employees across more than 35,000 businesses across the United States
• The index offers directional insight into the anticipated changes in the labor participation rate (e.g. if the index is <100% then the labor participation rate is shrinking compared to last year’s levels, it if is >100% it is growing)
• Shifts Worked: a total that is derived from aggregated employee time and attendance data, this metric reflects the number of times that employees “clock in” and “clock out” via a time tracking system at the beginning and end of each shift
• Shift Recovery: reflects month-over-month shift growth for a company or industry, as measured by time punches

Top Workforce Trends in Q2 ‘23

Workforce activity and shift recovery improved throughout Q2 for nearly all sectors, regions, and company sizes.

As you will see below as we break down these trends in further detail, larger companies lead much of the improvements seen over the quarter, with small-mid-sized companies still lagging in certain areas.

Continue reading below as we dive deeper into the top trends we observed in workforce activity in the US throughout Q2.

1. Increase in Shifts Worked

April 2023 recorded the strongest second quarter start for shift work since pre-pandemic levels in April 2019. Q2 shift work growth also showed an improvement from the first quarter of the year, which started strong yet tapered off as the quarter progressed.

Following a negative Q1 shift work growth of -0.7%, April already showed improvements, with shift work growth turning positive in May. This momentum continued into June, leaving the shift work growth positive overall for the quarter, as seen in the data below:

• April: -0.2%

• May: +1.0%
• June: +0.4%

May 2023 represented the first month with positive shift work growth since November 2022, which was supported by seasonal holiday strength.

Overall, shift work growth over Q2 was +0.4%. Thus, we can gather that there were more shifts worked across the economy throughout the quarter.

With Q1 shift work growth seeing larger declines over the course of the quarter and recessionary fears becoming heightened simultaneously, this Q2 shift work data is seen as a welcomed sign of strength in the labor market to finish off the first half of the year.

2. Slower Decline in Labor Participation Rate in the Overall Economy

Another major trend we observed was signs of a slower decline of the labor participation rate in Q2 ‘23 compared to the previous year’s levels in Q2 ‘22.

Industry experts focus on the labor participation rate to measure the portion of the population over the age of 15 that is actively working or looking for work. This metric includes people who are unemployed, but are still seeking out employment. But, it excludes unemployed individuals who have stopped looking for work.

Thus, slower declines in the labor participation rate may not necessarily signal that more people have found jobs. But, it may show that more people who have previously given up looking for work or left the labor market are re-entering and seeking out jobs.

The UKG Workforce Recovery Index is a directional indicator of the changes in labor participation in the United States. The year-over-year improvement shown in Q2 is what indicates a slower decline in the labor participation rate than a year ago, as seen below.

• Q2 ‘22: 95.8%
• Q2 ‘23: 98.3%

Aside from the year-over-year improvement, the index gradually improved over the quarter as well and is nearing an inflection point, seen in the monthly Q2 data:

• April: 96.4%

• May: 99.1%
• June: 99.5%

While there has yet to be a total rebound and growth in the labor participation rate, which would be represented by an index value >100%, this year-over-year improvement indicates positive momentum in the labor market as we head into the second half of the year.

The majority of the economy is made up of small-to-mid-sized businesses, and as we will discuss below, these are the only companies that have yet to see a full rebound in the UKG Workforce Recovery Index. Thus, we can assume that the inflection point will be driven by smaller business recovery catching up with larger companies.

3. Rebound in Healthcare Sector

Declines in workforce activity in the healthcare sector were slowing over Q1. Now, the sector has seen a meaningful rebound in workforce activity mid-quarter, which strengthened over the rest of Q2

We draw this conclusion from the improvements to the UKG Workforce Recovery Index for the sector throughout Q2:

• April: 97.6%

• May: 100.1%
• June: 108.5%

Trends in workforce activity for the healthcare sector already looked promising at the end of Q1. But, the Q2 values >100 signify improved workforce activity levels compared to the previous year.

So not only did workforce activity improve for the sector from the first to the second quarter of 2023, but we can also see that these levels are above Q2 ‘22 as well.

4. Rebound in Public Sector

The public sector was experiencing shrinking workforce activity levels throughout Q1. However, in Q2, those levels have improved and significantly rebounded in mid-quarter like the healthcare sector, showing better levels than in 2022.

As a reminder, the public sector refers to public government roles as well as employment in public K-12 education and public higher education.

Here is the data for the UKG Workforce Recovery Index for the sector throughout the second quarter:

• April: 97.6%

• May: 103.5%
• June: 103.4%

As we discussed with the healthcare sector, values >100 show year-over-year growth in workforce activity. Some of the possible explanations for this rebound include post-COVID recovery in schools and universities, which were largely impacted by the pandemic.

The improvements to the UKG Workforce Recovery Index for the sector throughout Q2 show a nice rebound from the declines seen in Q1, in addition to positive year-over-year improvements as well.

5. Rebound in the Northeast

Aside from the rebounds seen across various sectors in Q2, specific regions also saw strength in workforce activity over the period.

The Northeast had a rough Q1 regarding shrinking workforce activity compared to other regions of the country. Q2 levels not only improved but fully rebounded to above Q2 ‘22 levels.

Here is what the UKG Workforce Recovery Index looked like in the Northeast throughout the second quarter of 2023:

• April: 97.2%

• May: 101.7%
• June: 104.1%

April declines slowed slightly from the end of Q1. However, an inflection in May led to further momentum throughout the rest of Q2 for the region.

Similar to the discussions above, the year-over-year improvement to this index likely signifies a growing labor participation rate in the region compared to Q2 ‘22. Though there may be many factors contributing to this rebound, Q2 growth for the Northeast completely made up for the shrinkage seen in the first quarter of this year.

6. Workforce Activity for Small Companies Still Below ‘22 Levels

One of the few areas showing workforce activity weakness in Q2 was small companies. Q2 data for small companies show slower declines than what this group experienced in Q1. But, they have yet to hit an inflection point during this recovery period.

The UKG Workforce Recovery Index for companies with less than 100 employees was still below 100, indicating lower labor participation rates in Q2 ‘23 compared to Q2 ‘22.

• April: 94.2%

• May: 97.1%
• June: 96.3%

Even though there was a quarter-over-quarter improvement for companies of this size, the data still shows lower levels than Q2 ‘22, indicating a slower recovery than larger companies.

As we will discuss below, nearly all company sizes saw rebounds in shift recovery in Q2 compared to Q1. So, it is possible that these smaller companies will follow suit in the coming months to align with the rest of the economy.

7. Shift Recovery Strength for Nearly All Companies

Shift recovery for large companies was already strengthening over Q1. In Q2, nearly all-sized companies saw better shift recovery over the period, except companies with <100 employees which had negative overall shift growth for the quarter.

Here is some of the supporting shift recovery data for each month in Q2 by company size:

The positive momentum for shift recovery in larger companies may signify similar trends will follow for smaller companies in the near future. Again, smaller companies make up the large majority of the US economy. So, the impending positive shift work growth for smaller companies will likely send positive ripple effects throughout the labor market.

8. Manufacturing and Services & Distribution Sectors See Better Shift Growth

All other sectors started and ended the quarter with positive shift growth but the manufacturing and services & distribution sectors. However, although these sectors had negative growth to start the second quarter, they both saw improvements over the period.

In the end, both sectors ended off Q2 with positive shift growth after seeing a mid-quarter inflection in May.

Here is the Q2 shift recovery data for the manufacturing sector:

• April: -0.4%

• May: +0.1%
• June: +0.4%

And for the services & distribution sector:

• April: -0.5%

• May: +1.2%
• June: +0.1%

The improvements to shift growth for these sectors likely were caused by the same factors lifting all other sectors over the quarter, just with slightly lagged results. The recessionary fears that were felt at the end of Q1 could have kept growth muted at the beginning of Q2 for these sectors. However, the overall results for the quarter show that these sectors have made gradual gains throughout the entire first half of 2023.

What to Expect in the Second Half of 2023

Across the board, Q2 workforce activity levels came out better than Q1–and better than expectations. Lay-offs at the end of Q1 spread nerves across the economy that additional lay-offs were imminent. However, Q2 data showed surprising resilience and continued positive momentum for workforce activity is now at play throughout most sectors and company sizes.

During the second half of 2023, HR and finance executives can watch out for the following trends to inform their hiring and workforce planning within their organizations:

• Continued strong shift recovery across sectors: There may have been a seasonal summer lift to shift recovery data in certain sectors in Q2. But, Q3 and Q4 feature the back-to-school and holiday shopping season respectively, which will likely support shift recovery data in the second half of the year.
• Rebound in workforce activity levels for small companies: Following suit of the larger organizations, smaller companies should see an inflection point for shift recovery and UKG Workforce Recovery Index in the second half of 2023, which will support a broader recovery for the overall economy given the large proportion of small businesses that make up the US economy.
• Growth in labor participation rate: While the UKG Workforce Recovery Index has yet to cross over 100, the past few months of data show that an inflection point is imminent, which could receive the final push from recovery in smaller companies. This would signify a growing labor participation rate, the first since March 2021.

Q1 workforce activity started off hotter than expected and cooled down as the quarter progressed.

Table of Contents

1. Introduction
2. Key Findings
3. Data Sources & Methodology
4. Top Trends in Q1 ‘23
5. Decline in Shift Work
6. Shrinking Labor Participation Rate in the Overall Economy
7. Public Sector Weakness
8. Strengthening Healthcare Sector
9. Slowdown in the Northeast
10. Smaller Companies Saw Moderate Improvements
11. Unsteady Shift Recovery in Retail
12. Strong Rebound in Shift Recovery for Larger Organizations
13. What to Expect for the Rest of 2023

Introduction

The year’s workforce activity started off strong and better than expected following an uneven Q4, but levels declined throughout the quarter. 

Much of the slowdown in workforce activity that was seen in March is aligned with what experts had anticipated throughout the start of the year, especially amid a rise in recessionary fears that are resounding throughout the country. We saw a gradual decline of workforce activity throughout the quarter, despite a strong labor market with demand for workers and labor shortages in certain industries. 

Following the heights of the pandemic, this normalization of the market is welcomed in part, though looming talks of a recession will be a factor to consider as the year continues. 

Key Findings

• Q1 2023 workforce activity down from Q1 2022
• The monthly change in shifts worked in March ‘23 is the biggest decline since Aug ‘21
• The number of shifts worked declined -0.7% over Q1
• Retail workforce activity dips over the quarter
• Larger organizations see a strong rebound in shift work growth in March after falling throughout the earlier parts of Q1

Data Sources & Methodology

To complete our analysis on the state of workforce activity in Q1 2023, we compiled data gathered by UKG, a leading HCM cloud provider. 

We assessed their monthly workforce activity reports from January through March of 2023 to uncover ongoing trends in workforce activity in Q1 that HR and finance executives should be aware of: 

• UKG Workforce Activity Report – January 2023
• UKG Workforce Activity Report – February 2023
• UKG Workforce Activity Report – March 2023

Throughout this report, all metrics reported are derived directly from these above reports. 

In these reports and as we present our own findings, you should be aware of a few key terms to better understand the data:

• Workforce Activity: a comprehensive term describing the current state of labor and employment outlook in the United States, based on factors like the number of shifts worked by employees and pay statements
• UKG Workforce Recovery Index: a rolling 12-month scale created by UKG that measures the level of workforce activity relative to the same month one year ago

-The index tracks workforce activity levels of 4.2 million employees across more than 35,000 businesses across the United States

-The index offers directional insight about the anticipated changes in the labor participation rate (e.g. if the index is <100% then the labor participation rate is shrinking compared to last year levels, it if is >100% it is growing)

• Shifts Worked: a total that is derived from aggregated employee time and attendance data, this metric reflects the number of times that employees “clock in” and “clock out” via a time tracking system at the beginning and end of each shift
• Shift Recovery: reflects month-over-month shift growth for a company or industry, as measured by time punches

Top Workforce Trends in Q1 ‘23

Workforce activity for many companies, sectors, and regions in the U.S. have slowed down quite a bit over the first quarter of 2023, but not at an alarming rate. 

There were some outliers that we will discuss in more detail below, such as healthcare seeing improvements throughout the quarter and larger organizations rebounding in March. 

Let’s take a look at some of the prominent trends in workforce activity in the U.S. that we noticed throughout Q1. 

1. Decline in Shifts Worked

An overarching theme that occurred in the U.S. economy throughout the first quarter of 2023 was that there was a decline in shift work compared to the previous period.  

Following uneven patterns at the end of 2022 and a holiday season that was lackluster compared to expectations, shift work levels in 2023 started off flat, with no change reported in January from December levels (0% change). 

This was a stronger-than-expected start to the year; however, each month that progressed throughout the quarter saw incremental declines, including: 

• January: 0.0%
• February: -0.5% 
• March: -1.6%

March’s decline, in particular, was the largest monthly decline in shift work in over a year, since August ‘21 to be specific. 

When taken together, shift work declined by about -0.7% over Q1. All in all, this data shows that there continued to be fewer shifts worked across the economy throughout the quarter. 

A dip in shifts worked in Q1, particularly early in the quarter, is not uncommon after seasonal highs that typically occur in Q4 from the holiday season. However, the continued decline throughout the quarter indicates that labor activities may become more in line with the recessionary fears that are rippling throughout the macroeconomic environment. 

2. Shrinking Labor Participation Rate in the Overall Economy

Another major trend seen in Q1 ‘23 was evidence of a declining labor participation rate compared to Q1 ‘22 levels. 

The labor participation rate is a commonly referred to term in the industry which reflects the portion of the population that’s over 15 years of age that is actively working or looking for work. This includes unemployed individuals who are still searching for jobs. 

The change in the UKG Workforce Recovery Index between this year and last year is what indicates this trend, as the index is a directional indicator of the changes in labor participation in the country: 

• Q1 ‘22: 100.3%
• Q1 ‘23: 93.3%

This index has gradually declined each month over the past year, so the current levels aren’t out of the ordinary. However, the index has slipped significantly between Q1 of 2022 and Q1 of 2023. 

This decline gives us a clue that the rate of labor participation is on the decline, meaning that more people have left the labor force altogether, or have given up looking for work compared to last year.  

3. Public Sector Weakness 

Data from the past quarter alludes to weakness in the public sector, with a significant drop in workforce activity in this segment over Q1 ‘23. 

The public sector refers to public government roles as well as employment in public K-12 education and public higher education. 

Referring to the UKG Workforce Recovery Index, the index for the public sector saw a big downward swing throughout the quarter, worse than any other industry at this time: 

• January: 114.8%
• February: 99.0%
• March: 85.2%

What’s driving this decline isn’t entirely evident at this time. However, a few factors at play may include an aging workforce that is retiring at a more rapid pace as well as some lingering impact from the COVID-19 pandemic that pushed more people out of the labor market. 

4. Strengthening Healthcare Sector

On the flip side, we saw the Healthcare sector pick up strength in workforce activity as the quarter progressed. 

We draw this conclusion from the fact that the UKG Workforce Recovery Index for the industry saw steady improvements throughout Q1: 

• January: 83.2%
• February: 90.7%
• March: 91.3%

This shows positive momentum for the Healthcare industry in comparison to other struggling areas of the economy like the public sector. However, the fact that the index for each month was below 100% tells us that current work levels are down from the previous year. 

From this data, we can conclude that workforce activity in the sector has improved so far throughout 2023, albeit still below last year’s levels at this time.   

5. Slowdown in the Northeast

Particular regions of the country have also shown weakness to start off 2023 aside from just specific sectors in the economy. 

Namely, the Northeast region of the United States saw larger declines in workforce activity than any other region in the country–many of which actually improved over the quarter. 

Here is what the UKG Workforce Recovery Index looked like in the Northeast throughout the first quarter of 2023.

• January: 107.3%
• February: 95.1%
• March: 96.8%

The year started off with better workforce activity levels than January 2022, though this quickly shifted as February and March showed lower levels than the previous year. 

As you may be able to gather, the decline in this index throughout Q1 indicates that the labor participation rate is likely down in the Northeast. 

Again, there are many factors that could be leading to this shift; though the decline is meaningful enough to point to a trend that is likely ongoing in the region. 

6. Smaller Companies Saw Moderate Improvements

Companies with less than 100 employees and companies with 101-500 employees saw better workforce activity throughout the first quarter of 2023. 

This is in comparison to businesses of all other sizes that saw declines in workforce activity over the start of the year. 

Let’s take a look at the UKG Workforce Recovery Index for companies with less than 100 employees:

• January: 86.5%
• February: 89.9%
• March: 89.8%

Here is the data for companies with 101-500 employees over Q1: 

• January: 91.4%
• February: 92.2%
• March: 92.6%

While workforce activity moderately picked up for these smaller companies over the quarter, it’s still important to note that activity is much lower than it was a year ago, owing to a slowdown in the overall economy year-over-year. 

7. Unsteady Shift Recovery in Retail

Back on the industry-specific level, we saw uneven levels of shift growth across the retail sector throughout the first quarter. 

Shift recovery, or the month-over-month shift growth as measured by time punches, yo-yo’ed throughout the period, ending down slightly for the quarter compared to the last. 

Here is the monthly breakdown of shift recovery in the retail sector for Q1 ‘23: 

• January: -2.9%
• February: +1.0%
• March: -2.2%

Especially following the holiday season when retail is generally strong, this is not too concerning to start off the year. However, it is worth watching going forward to see how retail responds to the looming threats of a recession. 

8. Strong Rebound in Shift Recovery for Larger Organizations

Lastly, shift growth for large organizations saw a sizable rebound over the period, while shift recovery for smaller companies got worse over Q1. 

Companies with over 5,000 employees had the following shift growth in each month of the quarter: 

• January: -3.0%
• February: +0.2%
• March: +2.4%

As a reminder, workforce activity declined overall for these companies throughout the period, though their shift growth improved month-to-month. As you can see, the quarter started off with negative growth which then turned positive towards the middle of the quarter.  

What to Expect for the Rest of 2023 

Q1 started off strong, with activity rates mostly easing throughout the economy as the quarter progressed. There were some outliers to this trend, though the overall direction tends to be a slowdown in workforce activity alongside other economic indicators amid a period of economic challenges. 

For the rest of the year, HR and finance executives can keep an eye on the following trends to make informed hiring and workforce decisions in their organizations: 

• Shift recovery by region to normalize: the COVID-19 pandemic created widespread disruptions to shift growth that were felt nationwide; however, as the impacts of the pandemic largely remain in the past at this point, disruptions to shift work and growth will return to more localized and regional factors like extreme weather events
• Workforce activity continues to tighten: the labor market remains tight with labor shortages still prevalent in many sectors and continued positive job growth each month. But as economic conditions shrink across the country and the globe, workforce activity will tighten as companies look for cost savings and ways to cut back on spending with fewer and shorter shifts worked
• White-collar layoffs: at this time, layoffs will continue to be more widespread across white-collar workers as we have seen so far this year, and not as much for frontline workers

Attention has been focused on the idea of health insurance exchanges with the enactment of the Affordable Care Act (ACA). The law makes available multiple private insurance options in standardized coverage tiers through a federal or state sponsored exchange to people buying insurance on their own. Additionally, depending on income, they may be eligible to receive a tax credit to subsidize their premiums. Though not fully implemented in most of the country, the ACA also created SHOP exchanges for small businesses.

SET UP A CONSULTATION WITH A HEALTH INSURANCE EXPERT

An emerging option for employers

Both fully-insured and self-insured employers are looking to a new strategy that offers their employees diversity of choice, leverages technology to aid in making decisions regarding health benefits but still allows the employer the ability to manage its health costs from year-to-year. This strategy includes the deployment of a retail marketplace that offers a wide array of health insurance products to employees and sets an allocation of dollars per employee. This retail marketplace is often referred to as a private health insurance exchange or a “private exchange”.

What are exchanges?

Private exchanges are marketplaces of health insurance and other related products. Employers purchase health insurance through the private exchange, and then their employees can choose a health plan from those supplied. A big attraction for private exchanges is they allow employers to retain some involvement in their employees’ healthcare all while shifting to a defined contribution model.

What are the advantages to a private exchange?

There are two major classifications of exchanges that have emerged:

Single Carrier Exchange-This type of exchange is promoted by a single payor and targets employers that want to keep some control by choosing both the insurance carrier and design of the plan. Products can be customized and priced for the employee group or individuals, depending on how involved employers want to be in benefits design and negotiation.

Multi Carrier Exchange-This type of exchange is promoted by third-party intermediaries such as brokers or benefits consultants who will provide a broad range of payor and plan design options encouraging employers to take a more hands off role.

However, making the choice between a broker and TPA is similar to taking action in other areas of HR operations. You start by laying out the details of your business needs and objectives, and then determine which solution is the right fit. The process will give you insight on which is best for your company, at which point you can transition your employee retirement plan forward.

How is a TPA different from a broker?

A TPA consults with you to decide upon the best retirement investment vehicles available for your company’s specific needs, while also performing certain administrative tasks in accordance with a contract. The TPA is a registered investment advisor that helps you determine the advantages of different plan details as employer matching, IRA rollovers, employee deferrals and profit sharing. This person or organization isn’t a provider, but is rather a manager of a company’s plan to ensure it aligns with business objectives.

An insurance broker assists businesses with sorting through the vast array of employee retirement plans available, based on budget, size, objectives and other considerations. The broker facilitates the relationship between the company and a retirement plan vendor, but doesn’t actually provide any plan-related services or advisement. The task of selecting the right fit is somewhat challenging for companies to take on themselves, whether because they don’t have the time or aren’t knowledgeable in the field. Therefore, a broker is retained for the job.

Why choose a TPA?

If you’re looking for a close relationship with your employee retirement benefits provider, a TPA might be the better option. These organizations typically assign a specialist to your account, and this person serves as the point of contact for your entire company. The agent will have a comprehensive overview of your plan, accounts and other details; HR staff, employees and others have a direct line of communication to discuss questions and have concerns addressed by a credentialed investment advisor.

When is a broker a wise decision?

Companies may opt for an employee retirement plan broker when they’re looking for a person to help them find the right plan to fit their budget and business goals. A broker might be a good fit if you’re quite knowledgeable about retirement plans and benefits options you want, but you don’t have the connections to determine what vendors offer them. Once the broker points you in the right direction, they’re no longer involved with the process. Your relationship is with the provider.

What qualities are important when choosing a TPA?

• Reputation: Ask for referrals from similarly-situated companies and do research to find the right TPA. If appropriate, check licenses and industry registrations.
• Expertise: Your TPA should be knowledgeable in plan options and be able to offer creative, proactive solutions to maximize employee benefits.
• Communication: It’s essential that you get quick responses to questions and concerns, so make sure your TPA is reasonably accessible.

The choice between a TPA and an employee retirement benefits broker isn’t an easy one, but hopefully some of these considerations can help steer you to the right choice. Paypro offers an array of solutions to assist your company with administering a plan that coincides with your objectives, taking the burden off HR’s shoulders. Our specialists assist with daily issues, conduct periodic assessments and serve as an extension of your HR staff.

With such a mammoth project at hand, it’s helpful to know the proper items to put on your evaluation checklist. Here are four key steps as you’re choosing the right HRIS for your company.

1. Initial Considerations and Needs Assessment

It’s important early on to determine who will be spearheading the selection process, whether it’s the in-house HR or a consulting firm. Smaller HR departments that are busy with daily operations might need some help from professionals, so hiring an expert may be a wise choice.

The initial stage involves determining organizational needs as well. HR managers certainly have a wish list of features and functions, but there’s also a budget to consider. Companies just getting started with HRIS might start small with integrated payroll or build time and attendance tools onto their existing system. Because benefits administration is growing in complexity and promises to be a challenge, this might be a consideration as well.

2. Evaluate Vendors Suitable for Company Needs and Goals

Now that you’ve identified requirements and future needs, it’s time to work on a ratings system to assess the vendors that offer suitable HRIS. Create a list of specific requirements and include desirable features. Then, check off whether different vendors and their products fit the bill. Some items might include:

• Integration with existing payroll system
• A combined HR/payroll package
• Performance management functions
• Time and attendance monitoring
• Reporting capabilities, including custom
• Job and pay history
• Benefits administration
• Employee self-service
• One on one support

3. Demonstrations

Once you’ve narrowed down your list of potential HRIS vendors, you should start scheduling demonstrations of their products. Select 3-5 companies to do an onsite demonstration if possible, though an online demonstration is a common way solutions are showcased. Use the list of requirements that you created during Stage #2 to ensure that an HRIS meets your needs and prepare a list of questions in advance. You might consider assigning a value to each of the items on your checklist so you can rate solutions when you’ve seen all demonstrations

4. Final Decisions

As you’re coming closer to a final decision, it’s time to do reference checks and talk with the vendor’s other customers. Then, reconvene your selection committee for one final walkthrough of your requirements, concerns and questions. When you’re down to just two choices, bring out the scorecard to see how well each company compares to the other. You should be able to reach a HRIS decision at the conclusion of this phase.

Hopefully, these steps will help guide the evaluation process as you’re looking for an HRIS that suits your needs. At Paypro, we understand the importance of implementing robust solutions that focus on each essential HR function, from payroll and taxes to benefits administration and ACA compliance. Contact us and let us tell you why our HRIS meets all your business objectives.

Unfortunately, COBRA can be difficult to manage in an organization, especially for business owners who are inexperienced with it. Here are some of the best practices for handling COBRA concerns in your organization.

Understand the Difference between COBRA and the Affordable Care Act

The biggest difference between COBRA and the Affordable Care Act (ACA) is that COBRA is continuation coverage for people who have recently left a job or were laid off.

The Affordable Care Act is a sweeping reform to healthcare, both employer-sponsored and individual. The Affordable Care Act has resulted in the creation of insurance marketplaces, where employers and employees can go to shop for the plans that work best for them. COBRA does not have this type of open plan system; it is limited to one plan, the same one that the employee had at their former workplace.

Generally speaking, someone who has eligibility for COBRA will also be able to purchase an insurance plan on a state’s marketplace. However, COBRA usually requires the policy holder to pay for the full cost of the insurance premium, while the Affordable Care Act provides tax credits for citizens below a certain income level.

Know who is eligible

COBRA isn’t just for employees; it also extends to their dependents, including spouses and children. However, there are some qualifying events that may cause a person to lose COBRA coverage. For example, if an employee divorces their spouse, they can only get COBRA coverage for a maximum of 36 months after the divorce is finalized. This is why it’s important to take a thorough survey of your team and understand who is eligible for COBRA benefits.

Provide employees with sufficient information

It’s very important that your staff knows their rights when it comes to COBRA and other insurance concerns. For example, last year the Department of Labor announced that employers must make it clear to employees eligible for COBRA that they are allowed to choose a plan from the Health Insurance Marketplace. You should also be certain that you have a resource available for them to consult with when they need to get questions answered about the various employer-sponsored insurance options that are available.

Keep up to date with legislation and eligibility changes

It’s vital to make sure that you are up to date on laws that relate to COBRA and the Affordable Care Act, as this is an area that is currently changing quickly as a result of new legislation going into effect over the next few years.

To help you create an easier, more efficient system of monitoring, consider investing in modern tools designed to simplify the way that businesses handle COBRA and other insurance concerns. Paypro offers numerous HR solutions to help manage insurance plans, as well as a number of group health options to ensure that your employees have access to all of the health insurance that they need. You can also turn to Paypro for help with your benefits administration: the Employee Self-Service platform allows your team to get the information they need, while our Benefits Specialists are able to provide expert insight into how you should be managing employee benefits. Paypro has everything your business needs to spend less time worrying about staying compliant with insurance laws and more time leading the company to success.

In reality, employee time theft can be just as serious of a problem as traditional theft. Did you know that through time theft, an average employee steals roughly six full workweeks each year from their employers?

Time theft can cause a drop in organizational efficiency as well as customer satisfaction if it gets out of hand. Before determining what can be done to solve time theft, it’s important that you have a good understanding of how to identify it.

The Most Common Forms of Employee Time Theft

Time theft is more subtle than stealing supplies or taking money from a cash register or safe. In fact, some employers might not even know what time theft looks like. A few of the most common forms include:

• A coworker clocking in or filling out a timesheet on another employee’s behalf
• Employees consistently taking extra time on breaks or taking breaks when they aren’t supposed to
• Staff members spending excessive amounts of time handling personal business on the clock, from browsing personal social media accounts to taking personal phone calls at the office

It’s important to remember that in any organization, unexpected things happen that cause employees to have to devote their attention away from work. It’s unrealistic to expect your staff to spend every single second of their day working, and most employers won’t have a problem with an employee coming back late from break once in a while, or taking a brief personal phone call.

However, when time theft gets out of hand, it becomes necessary for an employer to step in and rectify the situation. There are several ways to accomplish this, but one of the best is to implement a timekeeping solution that is easy and accurate.

How Automated Timekeeping Solutions Can Stop Time Theft

One of the best choices for employers looking to stop time theft is a highly-sophisticated automated timekeeping solution. Why is this type of timekeeping beneficial for businesses that are worried about time theft? Several reasons:

• Automated timekeeping means that there is no need for manual data entry. The exact time that a person works is logged into a company’s computer system, without the need for anyone to move the data from a written sheet
• Easily-generated timekeeping reports will allow companies to determine which employees, if any, are consistently stealing time by showing up excessively late or spending too much time clocked out during breaks
• Compatibility with smartphones and tablets means that supervisors can determine whether their employees are on the clock even if they are not in the office together
• Sophisticated biometric technology prevents an employee from clocking in or out on behalf of someone else

Time theft can be a serious problem if left unchecked. At Paypro, our Time & Attendance Solutions will help you cut down on time theft, improve employee productivity, and give you greater insight into exactly how much time you are losing to this hidden problem in the modern workplace. Click here to contact us for more information.

You may think working in a comfy, climate-controlled office is safe and hazard-free, but there are many risks to your safety and health all around you. The Bureau of Labor Statistics reports tens of thousands of injuries or work-related health problems that office workers suffer each year.

Being aware of these dangers is the first step in eliminating them and reducing the odds of injuries occurring.

Here are five of the most common office hazards:

Slips, Trips and Falls

Universal slip, trip and fall culprits include unattended spills, wet floors, exposed cords, unstable work surfaces, uneven floors, loose rugs and cluttered areas.

Ergonomic Injuries

Office workers spend many hours a day seated at a desk, working on a computer, resulting in ergonomic strains and other injuries related to posture and repetitive movement. These types of hazards can be difficult to detect.

Eye Strain

Spending a large portion of your workday at the computer can cause eyestrain, eyes may become dry and irritated, and workers may begin having trouble focusing. Light levels should be suitable for the work task—for instance, manual detail work may require higher levels of lighting, but staring at a computer monitor does not.

Fire Safety

Fire departments responded to approximately 17,500 office fires in 2012, which resulted in $643 million in property damage, according to the National Fire Protection Association. Routine office inspections could reduce this danger.

Indoor Air Quality

The prevalence of poor indoor air quality has contributed to a rise in occupational asthma and other respiratory disorders, chemical sensitivity and allergies. Some of the reasons for poor air quality are inadequate ventilation systems; office overcrowding; the presence of cleaning chemicals and pesticides; water damage and mold growth; cubicle design that blocks off air flow to work areas; too much or too little humidity; and poor housekeeping, which leads to dirty work environments.

For more information regarding compliance issues, please contact us.