Fine Tuning Our Labour Cost Thinking

Whilst labour cost has always been an issue and is of course our second highest expense after stock, it has of late become a talking point amongst many retailers and hospitality venue operators.

Why such an issue given that we hire plenty of casuals, have an innate flexibility in rostering and push training compliance on to the staff themselves? The fact is that in many liquor businesses the wage cost is on the increase as we strive for improved customer service and as hourly labour costs have been driven upwards. Couple that wage cost increase with Margin drops in the retail industry and expense increases in both large and small hotels and other on-premise venues and we have severe downward pressure on bottom line.

Whilst new legislation such as WorkChoices and staff contracts such as AWA’s are now having an impact on how we run our staff teams, we are still running our businesses with staff teams made up from a mix of casual and part time staff in the main with little or no training and with low job life expectancy. Yet, as demands on our customer service levels grow is it more staff that we require to improve service levels or better staff or better trained staff?
 

Now when we consider the cost of poor recruitment and selection, it is easy to see how rostering extra staff to cope with customers, particularly at peak times, is endemic in the industry!

One of the confusing factors for some is simply how we calculate wages percentages. Too often industry owners/managers will take a pen to some shifts from next week’s roster to drop labour cost when things aren’t going well, believing that wages % will automatically drop! Of course we have only reduced one factor in the calculation. What happens in this instance when sales fall as well, perhaps due to low staff numbers – our wages % can often go up even though we are spending less money!

I would prefer businesses to look at ‘top line’ improvement i.e. Sales to drive their wages % lower – much better for ‘bottom line’ in the end.

We have other issues to consider:

• The impact of casual staff – the word ‘casual’ should never be used when applied to staff at work!
• Managers doing other people’s work for them for a myriad of reasons
• Poor rostering techniques – not understanding base manning levels
• Poor rostering techniques – not understanding sales peaks and troughs
• Poor or little cross training/multiskilling in larger organizations
• The often false economy of saving a shift and doing it yourself!
• Efficiency at work – the right person doing the right job, at the right time and in the right time.
• The setting standards in the workplace so that we can achieve efficiencies
• The impact of poor staff morale.
• The calculation and comparison of wages %’s – are management wages included, on costs included?

We cannot talk about labour cost without encompassing all the necessary variables. As labour costs continue to grow and expectations of service standards continue to rise, we need to do a lot more than slash next week’s roster.

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