Payroll Expense % of Profit - Help Please

Discussion in 'Business Operations' started by pasto_guy, Dec 4, 2008.

  1. pasto_guy

    pasto_guy LawnSite Member
    from VA
    Messages: 119

    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?
  2. Az Gardener

    Az Gardener LawnSite Gold Member
    Messages: 3,899

    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 LawnSite Silver Member
    Messages: 2,526

    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.
  4. pasto_guy

    pasto_guy LawnSite Member
    from VA
    Messages: 119

    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%
  5. newz7151

    newz7151 LawnSite Silver Member
    from Tejas
    Messages: 2,419

    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.
  6. B & B Yardscape

    B & B Yardscape LawnSite Member
    Messages: 131

    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.
  7. pasto_guy

    pasto_guy LawnSite Member
    from VA
    Messages: 119

    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.
  8. crab

    crab LawnSite Senior Member
    Messages: 633

    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.
  9. Tyler7692

    Tyler7692 LawnSite Bronze Member
    Messages: 1,086

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

    crab LawnSite Senior Member
    Messages: 633

    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:

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