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View Full Version : Payroll Expense % of Profit - Help Please


pasto_guy
12-04-2008, 11:11 AM
What percent of your gross income is directly related to payroll. I should clarify our circumstances. We did a little over 350 this year with six employees. My labor is 33% of sales and that doesn't include my workers comp expenses either. Is this the norm or am I paying out too much. We do mostly maintenance work and my guys are efficient. The routes are tight. Most of my guys have been with me for over 4 years and eventually I guess you can't pay them any more than they are already making. You kind of hit the ceiling for wages. What would you guys do in my situation?

Az Gardener
12-04-2008, 11:25 AM
I think you are in good shape, in fact I wish my numbers were near yours. I am hovering in the 50% range. For L/S construction they want to be at about 26% and they have a lot of materials that drive up their volume. You are only selling labor so if you are at 33 % I think that is pretty good but you need to get your other costs in there to get an actual #. I am guessing you will still be below 35% when it is all said and done. Good job and great thread too, I like the numbers, this information is much more interesting to me than most of the other bloviating that goes on here.

CLARK LAWN
12-04-2008, 12:01 PM
you guys are makeing me feel real good mine is 21%. that does NOT count my wages just my employees. I put alot of hours in so that may be part of it.

pasto_guy
12-04-2008, 01:04 PM
Thanks for the feedback. Yeah I'm a numbers guy too - with out them you just don't know where you stand. I'm in the process of figuring out where I need to go and how to get there, so I'm sure that I'll be asking you guys a lot more questions in the near future.
By the way after adding in my workers comp I'm at 35.45%

newz7151
12-04-2008, 01:10 PM
Also, as far as hitting a pay level ceiling, it must happen in every job.

I guess if you have guys that have been hard working reliable workers for 4 years, if you feel that they are limited out on hourly wages, you could look at something like a small profit sharing quarterly bonus system. This would give them even more incentive to do more work in less time, thereby improving your cost of labor to dollars ratio. You could get more work out of them without paying them more directly, and they get rewarded every three months for their extra hard work.

B & B Yardscape
12-09-2008, 10:30 AM
Are they asking for more money or are you just trying to get a feel for where you are at? 4 years and you like them, but don't want to pay more. I would look at incentives like health insurance, gym memberships, company parties, newer equipment. All of which are 100% deductable for your taxes.

Bigger, faster, better equipment can reduce labor costs in the long run. But you knew that already.

pasto_guy
12-09-2008, 11:30 PM
I was getting an idea of where I was at. I Think that I can get my percentage down by hiring more people next year (not getting rid of old employees). Newer guys to help accommodate growth, and less money per hour. Don't get me wrong, I love my guys, if not for them I wouldn't be where I'm at today. At the same time my job is to manage my company, and that means keeping costs down while increasing profit.

crab
12-09-2008, 11:53 PM
have you thought about getting youre best guy,a truck,cell phone,these help youre guys live better and you can deduct almost all of it,i do this and my guys love it.

Tyler7692
12-10-2008, 12:11 AM
have you thought about getting youre best guy,a truck,cell phone,these help youre guys live better and you can deduct almost all of it,i do this and my guys love it.


How do YOU afford it? There is NO margins in mowing around here. You must have a lot of guys...

crab
12-10-2008, 12:41 AM
i am mostly landscape construction,hard-scape but we maintan everything we build.mowing gardening etc i am not saying everyone can do this but i would rather reinvest into my company than just give money to the feds.i don't have a LOT of guys but good work always pays for itself.i.e you take good care of you're business it will take good care of you.people who do a good job are invaluable to maintaining a Strong business so any way you can keep them around and also build you're fleet without overleredging yourself is a plus.just my opinion,but there has to be a balance between the owner making money and the workers getting some perks for making us look good.:laugh:

B & B Yardscape
12-10-2008, 11:34 AM
I don't know about a truck, but a cell phone is a good idea. I was going to do that with one of my guys next year, but he looses his personal cell phone too much.

pasto_guy
12-10-2008, 12:08 PM
My guys already have a big perk. My two lead guys stay in two of my rental properties for free. So they are not asking for more money, I was just trying to lower my percentage. So instead of having 30.00 average payroll per two employees per hour, having 25.00 by taking one senior guy at 15 and one newbie at 10.00.

Az Gardener
12-10-2008, 11:41 PM
My guys already have a big perk. My two lead guys stay in two of my rental properties for free. So they are not asking for more money, I was just trying to lower my percentage. So instead of having 30.00 average payroll per two employees per hour, having 25.00 by taking one senior guy at 15 and one newbie at 10.00.

Pasto.. Pasto...Pasto...:hammerhead: How can we compare numbers when you pull a rabbit like that out of your hat? Two free apartments? that has to be worth minimum 500 per month. That's an extra 3 bucks per hour per man.

Fellas don't BS yourself into false numbers by ignoring your costs. I say this for your own good and the rest of us who are doing our best to recoup our costs.

I scoff at your 35% No soup for you!!! Festivus is just around the corner and soon all grievances will be aired.

pasto_guy
12-11-2008, 12:37 AM
Ouch that hurts AZ:hammerhead:
Now before you get too mad let me explain:
It will be hard for me to figure a real number on how much this truly costs. The houses are not completely free to live in, there are a few things. Along with the free rent comes responsibility. That includes mowing my other properties on their own time. That equates to about 5 hours a week. Also lets not forget the free maintenance of mowers, repairing broken equipment, and getting to the shop 30 to 45 min before everyone else clocks in to have everything ready to go for the day. I don't hand out gold platters, but for us this agreement works well. I believe that you treat others as you would like to be treated. If I can do something for them and they can inturn help me out as well, then why not. Don't you think these employees have every intention on helping me succeed, their humble abode depends on it.

Tyler7692
12-11-2008, 01:15 AM
Ouch that hurts AZ:hammerhead:
Now before you get too mad let me explain:
It will be hard for me to figure a real number on how much this truly costs. The houses are not completely free to live in, there are a few things. Along with the free rent comes responsibility. That includes mowing my other properties on their own time. That equates to about 5 hours a week. Also lets not forget the free maintenance of mowers, repairing broken equipment, and getting to the shop 30 to 45 min before everyone else clocks in to have everything ready to go for the day. I don't hand out gold platters, but for us this agreement works well. I believe that you treat others as you would like to be treated. If I can do something for them and they can inturn help me out as well, then why not. Don't you think these employees have every intention on helping me succeed, their humble abode depends on it.

That could quite possibly be the worst long-term business strategy/decision I've ever heard.

pasto_guy
12-11-2008, 10:09 AM
Tyler, can you explain to me how this is the worst long term business plan that you have ever heard of. By the way, what do you pay your lead guy?

pasto_guy
12-11-2008, 10:12 AM
Did I mention that the houses are also a write off.

RLC12065
12-12-2008, 09:22 AM
i believe that my employees are a vital part to my success. i also believe that when you work your butt off you should be able to live off what you make. i have 2 guys that both make $20 an hour. 1 guy that makes $15 an hour and all new guys start at $11 an hour. you sart at $11 an hour the first year, $13 the second, $15 the third. you then add a dollar an hour per year after that. they also all collect unemployment for 4 months over the winter. they all get cell phones. they all have the opportunity for health care and 401k's but must pay for that themselves. this may sound crazy to some but because of their hard work i make a great living. i also want to guarentee that they are not only happy but wont be going anywhere anytime soon. i've paid guys less and i got less work and dedication from them in return. i could make 5-10 thousand more a year but would the quality of the work be as good? would i have to worry about guys ot showing up everyday? its worth it to me.

pasto_guy
12-12-2008, 09:47 AM
Thank goodness someone else sees the importance of great loyal employees. You get what you pay for.

ford550
12-12-2008, 12:00 PM
You definately get what you pay for. I have 12 employees and the range is from $11 to $20/hr. We mostly do design/build but I do maintenance too (that's how I started 19 years ago). Anyway, I have been able to retain the majority of my workforce because of the extra perks and things. Nothing special, company picnics, bonuses, dinners, lunches etc. It goes a long way and it is relatively cheap for the performance and quality I get. I have one employee that has been with me 8 years and only has missed 3 days of work.

Duncan IN
07-02-2010, 02:02 AM
I will keep it simple mine is 31%

snomaha
07-12-2010, 12:47 PM
That could quite possibly be the worst long-term business strategy/decision I've ever heard.

Ha ha ha. :laugh:

snowman55
07-12-2010, 02:01 PM
you can't know your #'s if you do all that back door stuff. Tax code says you have to include the housing as pay and your writing it of also? Kind of like the coal miners who got paid with co. money only good at co. store. If you want to know where you really stand do everything legit. pay your guys for their work and charge them rent as a landlord. You are crossing many legal lines and putting your neck out. Who covers an injury while they "mow on their own time", who gets the rent credit? Their work should be over time? aren't you really skipping out on some of your unemployment. workers comp.' and tax liabilities?

my rates are from 40% to 31% depending on the crew these #'s don't tell the whole story. what is the overhead per crew? a 5 man crew has way less overhead per emp then a 1 man. What are the variable costs? What counts is the net profit per crew and anyone who says its higher than 20%, is either lying, doesn't understand accounting principles, or is better than anyone I ever met.