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- Category: Accounting Advice
How much are your labor costs? Do you REALLY know what you spend? There may be some hidden costs that you do not factor into your cost of labor. For instance, there are costs associated with recruiting, training, benefits, vacation and sick time, insurance, and so on. It’s important to know how much this expense truly is.
When you bring on help and labor but it does not work out, you have invested a lot of money. If you’re paying for employee benefits like sick time, personal days, vacations, and holidays, understand that your pay rate is higher than your hourly wage. It is very important to know what your labor costs are.Think about these benefits you give to your employee, not to mention payroll taxes, training, insurance, uniforms, and intangibles, LIKE YOUR TIME!
The labor cost is the biggest expense of your business and you need to manage it properly. Keeping your labor costs under control is a difficult thing to do. Your company’s labor accounts for over 50% of your costs. This is easily the largest cost you carry on your Profit & Loss statement. You must attempt to put together the best team you can find and make your labor force as productive as possible. Give each employee the right amount of work so they can produce more revenue enabling you to pay them the right amount of dollars. The trick here is to make each employee a profitable entity within your business.
Make sure you can financially justify each member of your organization. You have to… because the labor cost to carry each employee is just too high to bear the extra weight.
Labor Cost: Employee Salaries
Employee salaries are a huge expense for service companies, such as PMP businesses. Thus it becomes critical that you optimize the time your technicians and office staff spend on the clock. Proper scheduling can help you to decrease downtime and therefore save your business a considerable sum of money.Your service routes need to be tight in order for your business to get the most productivity out of your technicians’ time (we discuss this in depth in our other manuals). But that’s not the only place where you can strive for efficiency and productivity. You must manage the time of the people that work IN your office as well.
As your business grows, you start developing a workforce in your office. When you go from 3 employees to 10 employees, you really start to see the need to grow the in-office support staff. A ratio of 4 or 5 technicians on the road per single office personnel is a reasonable number.
The roles of your office personnel will change as the business grows as well. You may start off needing someone who can wear a few different hats. This person may be a customer service rep, a bookkeeper, and a receptionist all in one. As you grow, you will split the responsibilities amongst a number of office personnel.
Post Your Schedule – Once you begin growing your office staff, you must start paying attention to scheduling to get the most mileage out of your employees. For example, if you have new employees, determine when is the best time for training activities to get them ramped up into the mix.
Create a clear schedule and post it in a place that everyone can see. This schedule will include your business’ hours of operation as well as who is “on duty” for which shifts. Make sure it’s easy to read and there is no confusion. In addition, make a contingency plan where employees back each other up should there be an emergency and someone cannot make it to work that day.
Configure Your Office to Maximize Productivity – Another thing to consider is the way your office is set up. This is important as the flow of traffic through your office can increase OR decrease productivity. You want to make your office environment dynamic and keep your employees engaged in their jobs. This will make your workforce more involved, while keeping unnecessary chatter to a minimum. Learn more about managing and motivating your pest control team.