Getting a Return on Labour

HousekeeperIt is always important to look at the issue of labour in your business. More importantly, what your level of labour is as a percentage of sales.

There are two main areas in your business that are labour intensive; cleaning of units and common areas as well as completing work in units or for the body corporate.

Your labour percentage relates specifically to the critical aspect of profitability. There are many resources you can engage in your business to get the most out of your team. Ultimately at the end of the day, there are two measures that businesses have used over the years to measure productivity.

1. The amount of labour (in $ terms) engaged per year as a proportion of sales

2. The quality that the labour has produced – either the product or service output.

If quality is high and labour is reduced then you have improved your use of labour in the business.

Quite often we can get caught up in what we do and not focus enough on the hard earned dollars that we invest into labour. Having said that, you may find that your team is working as productively as they can and the output is of a high standard. More than likely though, you will find that there is room for improvement in either increasing output or increasing quality or both.

For your own business, try calculating your cleaning wages or contract cleaning costs as a percentage of cleaning income. Then compare this to the figures you bought the business on or an industry average such as the ARAMA Costs and Charges Survey. Also, compare your current year percentage to last year's percentage. Is it better or worse?

For those in management rights, look at your income from work done in units or for the body corporate as compared to what it was when you purchased the business. Are you charging all your time in units? Can you maximise your income from this source? Think about what an outside person would charge for doing the same work.

If the labour percentage is down, consider what you have done to become more productive. If the labour percentage is higher, consider what you have done to utilise more labour? If you have intentionally increased labour to improve service or quality, then this is the result of your decision.

You should try and measure your labour at least monthly. As labour is typically paid within a 1 – 4 week period, saving on labour or maximising productivity can equate to improved cash flow for your business.

Because labour is such a high proportion of your costs, it is important to measure and manage your labour costs. If you can maximise your return on your labour, then you are a long way towards improving your bottom line and thus the value of your business.

Stephen Shirley
sps Audit

Top Management Articles

Attributes of a good motel manager

amg39-HR-staff training 300x231
There has been a rapid growth over recent years in the number of motels throughout…

Yield management of accommodation complexes

AMG36-MGT-Bus Finance 300x225
The following article has been written around a presentation to motel and management…

Colour rules your web site!

colour 235x175
Leonard Lauder, chairman emeritus of Estée Lauder, claims you can judge the economic…

Other Top Recent Articles

Airbnb makes hosts liable

AN62-3-news-airbnb 300x225
Airbnb has thrown the onus of local by-laws and restrictions onto its hosts. Airbnb…

Defamation – when is enough, enough?

COL-MYERS-14 300x225
As we all know, living or working in strata can get very personal. I am often amazed at…

Priceline goes for Google, rejects others

AN62-3-news-Darrel Houston Priceline 300x225
Priceline Group spends feverishly on Google advertisements to grab users searching for a…

Disputes - follow the rules

213-BCCM Report-Ingrid Rosemann 300x225
The commissioner for Body Corporate and Community Management, Robert Walker, has recently…

Former airliner to serve guests in WA

AN62-3-DN-The Lily 300x225
A 71-year old World War II Douglas DC3 aircraft will soon be added to the existing…

$38m two tower complex for Wollongong

AN62-3-DN-Oxford On Crown 300x225
Wollongong's Oxford Tavern is making way for a $38 million residential complex to be…

Sustainability awards a terrific profile

AN62-3-news-sustainability awards 300x225
Finalist in last year's Premier's Sustainability Awards, Phillip Island Nature Parks, is…

Australia’s first chaperoned schoolies tour of Europe announced

AN62-3-news-Unleashed Travel 300x225
Unleashed Travel has announced the launch of another first for Australian teens: European…

New additions to Ascend hotel collection

AN62-3-DN-Balgownie Estate Vineyard Resort  Spa 300x225
Choice Hotels Australasia has announced two more additions to its Ascend Hotel Collection…

Visas for Chinese visitors "too hard"

AN62-3-news-chinese visas 300x225
Delegates of an Australian trade mission to China, that included the Australian Tourism…