A salaried staff member is one who is paid a set amount each week, month, or year, rather than being paid per hours worked. Though putting an employee on salary (or declaring them exempt) can have major benefits for both your business and for the employee, there are some analytical problems that are created by having salaried employees.
Labor percentages, which compare the budgeted (scheduled or theoretical) cost of labor to the actual (clock ins/outs or attendance) cost of labor, can be complicated by salaried employees because the amount they get paid each pay period can fluctuate from the scheduled cost (estimate), due to vacation time and other variations in work time. Salaried employees can also make daily labor reports complicated because their fluctuating hourly wage is variable based upon the number of hours that they work.
TimeForge can help you accurately track your labor percentages even if you have salaried employees by simply changing a couple of settings.
Labor Percentages with Salaried Staff
Below is an example of a salaried employee and the analytical problems that are related to salaried employees. Salaried employees can make weekly labor reports complicated because their weekly pay rate can fluctuate. Imagine:
- John gets paid $52,000 annually, which breaks down to $1,000 per week. ($52,000 annually, divided by 52 work weeks in a year, is $1,000 per week.)
- But what if John takes two weeks of vacation this year, so he only works 50 weeks this year? Well, then we can say that John gets paid $1,040 per week. ($52,000 annually, divided by 50 work weeks this year, is $1,040 per week.)
So does John cost $1,000 per work week or does he cost $1,040 per work week? This 4% difference could skew your business’ labor percentage reports.
Salaried employees can especially make daily labor reports complicated:
- So, if John works 52 weeks per year, and he is scheduled for 40 hours per week, we can say that he is paid $26 per hour.
($1,040 per week, divided by 40 hours, is $26 per hour.)
- But, what if John is only scheduled for 20 hours one week? Then we can also say that he is paid $52 per hour, for that week. ($1,040 per week, divided by 20 hours, is $52 per hour.)
So how much money should be reported as John’s labor costs? Does John cost $26 every hour he is at work, or does he cost $52 every hour he is at work? This could really skew your daily labor percentages!
You can see why salaries can cause so much trouble with labor percentages. So, how do you deal with these problems, so that you can accurately track theoretical vs. actual labor costs?
Scheduling Salaried Staff
You need to decide whether you want to see John’s hours in your labor percentages. You can choose not to see them at all, or your can modify the way that you see the hours so they aren’t as variable.
Consider whether your salaried employees clock in when they are at work. If they do clock in, you can set their pay rates as hourly rates instead of salaries – regardless of how you pay your staff (that’s a separate function). This way, fluctuating hourly wages would always be a set amount, so you wouldn’t need to worry about a surprise high cost in your labor percentage reports. If your salaried employees don’t clock in, you can set the hourly rates to $0, or change your option settings to automatically copy a salaried employee’s scheduled hours to his or her attendance.
TimeForge Labor Management can improve your profits by 3-5%, often paying for itself in the first week alone, offering instant ROI for your business! Sign up for your free trial of our employee scheduling software today!
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