Controlling your labour

What you need to know

• The cost of the people element of your business is variable, which means that you can control it. This is unlike your rent for instance, which is often fixed. The fact that it is variable means that it can move up or down, in relation to your sales, every hour of every day.
• Your cost of labour (wages and salaries) expressed as a percentage of your sales is a very commonly used performance indicator used across many different types of businesses. This is called your wage percentage or labour percentage.

It is crucial that you control the cost of your people so that it is in line with your targeted labour cost. Use the labour cost calculator to calculate your cost of labour.

What you need to do:

You can do this, alongside the obvious need to recruit and train effectively, through:

• Knowing what your targeted wage percentage needs to be
• Managing your labour schedules (rotas) to ensure that you have the correct amount of people with the right skills mix at work when you need them
• Having an efficient payroll system to ensure that your team gets the correct pay, and that you control the accuracy of the total amount you pay for wages and salaries,  holiday, sickness, maternity, student loan repayments. It will also help you stay on top of your commitment to HMRC around ‘Pay As You Earn’ tax, employees national insurance  and employers national insurance