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Metric #1 – The Wage Cost
The scintillating radiance of one lone figure actually carries enough weight to make a judgement call on whether it’s been a successful week for a hospitality business.
The Wage Cost.
“A figure that denotes all of the wages a business pays to its employees, as well as the cost of all employee benefits and additional costs. ” (1)
There’s a common and somewhat dated business saying “you can’t manage what you can’t measure”. Whilst undoubtedly accurate, I think it’s possible to develop this mantra into something a little more transparent. Something that really gets to the nitty gritty of great business acumen.
What is it that you are actually measuring?
And, are you measuring all the right things?
Metrics are a routine and are relative to any given business goal. For a hospitality business, the wage cost stands to be one of the most controllable costs of them all. It is a figure determined by what proportion your overall turnover and net profit will delegated to your employees.
It is not unnatural for this figure to vary significantly from business to business. From our years of experience dealing with major hospitality chains right through to the smaller outfits – a wage cost figure can commonly sit anywhere in between 20% and 40%. There is no right or wrong figure. Again, it’s relative to your overall business goals.
The wage cost is often not a simple figure to accurately calculate. Additional costs, such as superannuation, accrued leave entitlements etc, always have to be considered. But by paying attention to the detail, come the end of the financial year – your accounts team will be sitting happy. Secure in the knowledge that all employee benefits and taxes were accounted for right from the beginning.
The result? Increased validity, transparency and clarity about how you’re really tracking financially as a business.
Meticulous and effective employee scheduling plays a crucial role in the performance of any hospitality business. If you’re interested in more information about how the right tools can increase the financial transparency for your business – jump on over to our technology section of the blog.
1 Cost of Labour Definition. http://www.investopedia.com/terms/c/cost-of-labor.asp