Metric #4 – Wage Cost vs Turnover
The final metric in our series is the Wage Cost vs Turnover which is often expressed as a percentage (the Wage Cost Percentage).
Most hospitality operators are aware of this measure and, more often than not do take note of it, although this is more commonly examined after the game has been played.
We’ve spoken previously about how important we think it is to examine the Wage Cost Percentage not only after a week has been worked (a lag measure) but also before the rostered week has begun (a forward measure).
However no matter how you arrive at your number, there is one vital factor that we often find some operators fail to understand;
What happens when your Wage Cost Percentage is too low?
Whilst it’s a fantastic achievement to get your costs down, the fact is that if your wage costs are far below industry norms it likely means that your business is providing bad service. In many cases very low wage cost percentages can indicate that your staff are simply not able to cope with the workload. It also means that some of your customers may not return.
So we recommend working hard on planning and efficiencies to keep your Wage Cost Percentage down low… but not too low!