The Hiring Handbook

The Actual Hourly Cost of Hospitality Staff

Posted by Scott Erwin on Apr 12, 2018 1:46:01 PM
Scott Erwin

In food retail, “fully-loaded” is a term more frequently tossed around with an ambitious burger order than in the consideration of staff costs. When taking into account insurance, pensions and holiday pay, employers should add between 15 - 20% to the base hourly rate when calculating the actual hourly costs. A failure to consider the “fully loaded” cost of staff will, at best, render certain business KPIs such as staff cost / sales misleading and, at worst, sink your business.

The cost of labour is one of the largest expense associated with running a hospitality businesses with industry best practice suggesting it should be 25% - 30% of sales. (Report: A steak in the economy, Nesta 2013

Indeed, keeping staff costs below this magic threshold seems to be THE primary metric for judging GM performance in the industry. Given this importance, accurately measuring and tracking this cost over time should be of top priority to a business owner and her team.

In speaking with hundreds of hospitality businesses, we at HireHand have encountered significant confusion over the actual cost of labour. Nearly all managers will have a handle on the base or advertised hourly wage paid to staff and what a total daily or weekly staff cost looks like depending on the number of hours worked.

Most - especially those directly involved in payroll - will recognise that additional staffing costs such as Employer National Insurance Contributions, Sick/Holiday Pay and Pensions costs apply. However, very few will be able to apply these costs to their hourly rates to their base wage to come up with a “fully-loaded” hourly cost.

This is perfectly understandable given the many nuances associated with employment contracts and their associated benefits. Fully loaded costs will differ depending on whether, to name a few, an employee is: on a zero-hours or full-time contract; on a hourly or fixed salary; above or below the age of 25; earning above or below £162.01 a week; has opted into the pension contribution.

Staffing costs breakdown

Above: Breakdown of hourly wage. 

Amidst this complexity, employment experts suggest adding 15-20% to the base hourly rate in order to calculate the actual hourly costs of your team. The breakdown of this uplift can be seen in (Exhibit 1 which assumes a base rate of £8.50 and sees a fully loaded cost of £10.10 as a result.

 

Example of what your hourly rates are "fully loaded"

 

Comparison wages

When considering your fully loaded salary this can make HireHand an affordable solution for your short and long term staffing needs. To discuss this further contact zara.beach@hirehand.co.uk or sign up to get going straight away.

 

Topics: Understanding costs

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