Four Ways to Manage Your Labor Costs — Your Biggest Expense
Are you making the most of your electronic timekeeping and doing all you can to limit the amount of “false time” being reported on your cleaning jobs?
Right now, your cleaning business is under a lot of pressure to remain cost effective and save money wherever and whenever possible. Managing labor is the name of the game in the janitorial industry, where anywhere from 55-90% of your expenses are tied directly to labor. But if you can properly manage this labor, you can see real savings that will positively impact all areas of your business.
Here are for labor saving tips to help you maximize your profit potential.
The first step to effectively manage your labor costs is accurately tracking how much labor is being spent on each job. Prior to the onset of the tech revolution, most cleaning companies used timecards that were filled out manually and workers were on the honor system to fill out their timecards accurately. Some companies still record their cleaners’ hours this way, although many have moved to a mobile workforce management system.
Even giving most workers the benefit of the doubt, a few employees being dishonest or even just rounding up their time could impact your nightly hours by a decent amount. Just two hours per night of “false time” would cost a company about $6,000 over the course of the year. This is no small amount.
To limit the amount of “false time,” every cleaning contractor should make full use of electronic timekeeping. Many systems are available that require employees to clock in via a mobile device, which also tracks the location, to ensure time recorded is actually being spent on the job. For every employee that saves 10 minutes per night, this equates to over $500 a year in savings.
Timekeeping Reports & Budgets
While our first tip helps you reduce “false time” and maximize labor accuracy, tip number two focuses on managing those hours actually being worked. Nearly every mobile timekeeping system generates labor data that can be tracked daily. Each day, managers should review reports of the previous day’s labor, broken down by job. Each job should have budget hours that you compare actual hours to.
For instance, if a job is budgeted for six hours per night, you want to ensure the hours being worked consistently stay at or below the budget. If you don’t monitor these hours on a daily basis, you can’t make corrections before it’s too late and you’ve spent unnecessarily on labor. The goal of daily hours reviews is to ensure labor doesn’t go over budget, while at the same time ensuring workers aren’t neglecting an account, leading to a quality issue.
One additional benefit of hours reports is being able to compare labor hours across jobs, looking for potential efficiencies. If two facilities of similar size and density are cleaned at different rates, this should indicate a potential labor savings at the less efficient account.
Watch For Exact Hour Amounts
Imagine this scenario: You have an employee working at a building who is logging exactly six hours per night. What is potentially going on in this situation? It is very possible that the employee has in his/her mind that they are allotted a certain amount of time and they intend to get paid for that amount of time each night. As a wise manager once said, “Work expands to fill the time you give it.” One of the advantages of a mobile timekeeping system is to pay only for the hours worked. So, when you see exact hours being worked on a consistent basis, likely an employee is working less than the amount recorded.
Now to be fair to your hardworking employees, I don’t want to encourage you to unnecessarily cut their hours. Many of our workers are under-appreciated and need our support and encouragement. However, we also can’t afford to pay for unnecessary hours. Be fair, treat your people with dignity, but don’t allow hours to be wasted.
Holiday Savings Plan
With labor accounting for over half of your total business costs, any chance to save labor will be a chance to increase profits. And major holidays are a perfect place to make that happen. When you consider the main holidays that often fall on weekdays (Christmas, Thanksgiving, Labor Day, Memorial Day, New Year’s Day, and Independence Day), you find six opportunities to save on labor. However, this goes beyond saving money on the holiday alone.
Most every customer you serve observes these six holidays and allows their employees time off during them. Likewise, they rarely expect cleaning on these days. However, many companies are also flexible with their employees on the day before major holidays, giving them the opportunity to leave early. Knowing their expectations can be lower on these holiday eves, contractors can coordinate with their customer contacts to inquire about a one-time limited service scope with such things as spot vacuuming traffic areas as opposed to full vacuums, spot mopping instead of full mops, etc.
A simple calculation shows the potential savings you can gain by implementing these changes. Assume a cleaning contractor has about 200 labor hours each evening and could save 25% with a holiday savings plan. With six holidays per year and $12 per hour per employee, this would equate to an annual savings of $3,600.
As a 3rd generation owner, Jordan Tong has used various leadership and strategic approaches to grow the business from $1.7 Million to $15M since starting in 2007. Jordan also offers 1-1 consulting through his company Elite Business Coaching and leads their unique and powerful online Janitorial Mastermind Group.