Small Retail Business Risks > Labor Costs
Labor costs are one of the most significant expenses for small business owners. You need to offer competitive pay to keep the most qualified and experienced people in your business, but you are likely working with a strict budget. However, getting a handle on these costs and working to reduce them often equates to having some difficult yet truthful conversations with your employees. In this final installment in our article series on retail challenges, which included preventing cyber-attacks and managing economy fluctuations, we’ll examine how to minimize labor costs without creating a negative spiral effect on your business. Moving forward, protect your operation with Network Security Insurance, which is part of our comprehensive and iron-clad Miami Retail Insurance program.
Review salary histories.
Salaries and wages tend to consistently move upwardly, even though markets and financial conditions change. Review your pay schedules to be sure they are in line with current trends, not the result of history. If current employees are earning more than what would be paid for their jobs today, delay or make only token raises until such time that your payroll comes in line with current trends; Have a frank talk with the employees affected so that they know what to expect and why their expected raises will not happen as in the past, says Money Crashers.
Easier said than done, but hiring and training employees takes a lot out of your budget. Not only is it better for morale to keep employees for a long period of time, it’s also more cost effective as you won’t be spending money on recruitment, training, and other costs.
Rework the pay scale.
Rather than terminating employees, try converting their costs into an expense that is only paid when there is accompanying revenue. For example, a salaried salesman may be willing to accept a higher commission rate and less guarantee, or an installer might accept work as a contract laborer when work is available.
Review your process.
As your company grows, various departments are likely conducting repeat processes without your knowledge. Evaluate each department, if applicable, and determine if you can minimize redundancy.
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