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A guide to labour cost management

Summary

Calculating labour costs can be complicated, and while labour costs are a natural part of running a business, there are ways to cut down on them without sacrificing employee or customer experience.

Scheduling and labour forecasting software is vital for calculating labour costs accurately.

Whether you’re a small cafe, a chain of restaurants, or a global enterprise, you need to know how to calculate the cost of your labour and understand how it affects your bottom line.

Here are few essential things to consider about labour costs:

Rostering to match demand

Rostering to match demand is undoubtedly the most important aspect of keeping labour costs under control. This involves a delicate dance of avoiding over-rostering and blowing out your cost base, but also preventing under-rostering – and missing key revenue opportunities.

In our experience, here are some of the top issues businesses face when making rostering decisions:

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    Don’t get stuck in patterns

    There’s a tendency to set and forget with rosters. Many businesses will draw up their seasonal rotas and not update them, because it can take a large amount of time and research. This is fair enough – but with costs rising, now is the time to review these arrangements.

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    Get the right hours of trade

    Your hours of trade are the biggest input that affects labour costs. Which  days you are open and for how long is the big question here. It’s worth considering whether your business should be open on weekends and where peak demand days are. These peak demands should be balanced against peak costs, for example, opening on weekends and at night is more expensive.

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    Plan for special events

    If there are special events that will affect demand for your business, make sure you plan ahead for how they’ll affect your staffing requirements. A classic example of this is a pizza shop on English Premier League night.

Retaining and training staff

With the UK still experiencing labour shortages, it’s become more important than ever to retain your staff and to increase your flexibility by training them well. Every business will have a different strategy for retaining and training staff, but as a brief overview, here’s what we would recommend:

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    Roster balance

    These days, workers are less likely to tolerate brutal hours and shifts continuously. Chances are that if you give people long shifts late at night or on weekends, they’ll leave the business, or worse, hang around and give poor quality service.

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    Workplace culture

    Workplace culture is a buzzword that gets thrown around a lot these days, but it’s still worth being aware of how you can make your business a good place to work. We find that setting goals for employees, giving financial benefits for things like extra sales, and recognising staff for good work in general is a good way to operate here. Little things that show a bit of goodwill towards your employees are always appreciated.

Using data and technology

Data and technology is the key element that ties everything together to have the best possible labour cost management. Using data and technology gives you quick access to quality insights and improves decision making. Making informed decisions about sales, inventory, staffing, and rostering is crucial to the success of your business. Workforce.com has a number of tools that can be used in this regard.

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    Forecast your revenue

    Forecasting revenue is key to staffing your business correctly. With Workforce.com, you’ll be able to integrate your point of sale system and develop a good forecast based on historical data. You can alter this forecast manually for lower or higher trading days that you expect to happen. For example, if there’s construction work outside the business, you can plan for a lower trading day.

Managing labour costs is a critical aspect of running a successful business, and it requires a strategic approach that balances efficiency with employee satisfaction. By leveraging advanced scheduling and labour forecasting software, businesses of all sizes can accurately calculate and manage their labour costs, ensuring that they are neither over- nor under-staffed while maintaining a high standard of service for both employees and customers.