It’s no secret that costs are going up in the hospitality industry. The National Living Wage is set to rise by 4.9% in April, alongside a 1% increase for employer pension contributions. Factor in falling net migration and a shortage of skilled staff pushing wage inflation as well as an uncertain economy affecting consumer confidence and it’s easy to see why hoteliers are feeling the squeeze, however, the picture isn’t all doom and gloom. We’ve outlined some of our top approaches that we regularly use when advising hotel clients to make sure payroll spend is managed in the best way possible.
- Budget, Budget and Budget Again – We help our clients to set annual budgets to plan and forecast expenditure, but a budget is only as good as the information it uses, and it’s essential to update them regularly. Using smart accounting software, like Xero, means you can efficiently streamline your accounting processes and keep your budgeting forecasts on track. Producing monthly management accounts means you have the detailed departmental labour costs that you need to review actual spend on a regular basis and update any forecasts on a rolling basis.
- Labour to Revenue Ratio – Keep an eye on where your staffing costs sit as a percentage of your revenue, this key metric is a handy way of checking that your wage bill isn’t getting out of hand, as well as a useful way to benchmark against the hospitality industry. We regularly advise hotels on where they sit alongside their competitors. Tracking against revenue is a great way to show how flexible your labour cost is, making your business as efficient as possible.
- Costed Rotas – Costed rotas are a fantastic tool for keeping your revenue to wage cost ratio targets on track. We implement easy-to-use specialist software, which generates work schedules that not only show which hours are on the rota but also how much this is going to cost each department. Comparing this cost to forecast revenue on a weekly basis ensures that you will protect your margins.
- Track Time and Attendance – Budgeting is an excellent first step to make, but tracking how that budget unfolds in the real world can lead to even more significant savings on your wage cost. Again, our specialist software can do the heavy lifting, easily tracking employee time, attendance levels and labour cost. By monitoring actual work hours on a daily or weekly basis, you can ensure there are no nasty surprises at the end of the month as well as giving managers full control to approve timesheets. Once implemented our clients typically save 5% in labour costs by using attendance tracking software.
- Pay the Going Rate – When setting your employee pay levels proper benchmarking against the industry is a must. Controlling labour cost is key, but you don’t want to lose talented, experienced candidates to your competition by setting your levels too low. We can advise our clients on setting wage levels taking key individual considerations such as location and business size into account, and with extensive industry knowledge, we’re able to quickly spot when you’re paying too much.
Did you find our wage control tips useful? Advising clients on how to keep wage costs down is just one of the ways we use our management accountancy services to help hoteliers. Get in contact today by calling 01823 711007 or emailing email@example.com to find out how we can help you.