What Are Acceptable Industry Norms for Retail Payroll Expenses?

I’ve had a couple readers recently ask about payroll and what are the normal rates for payroll for a retail store.

This is one of the biggest areas of opportunity for retailers as I’ve seen numbers as high as 25-30% of sales.

The general rule of thumb is to try to hold payroll to no more than 12% of sales.  If you’re doing that, then you’re on par with major national retail chains [and doing incredibly well].  If you’re a single store, and you are the owner, then you should allocate a portion of your hours into that number as well – allocate your hours that have anything to do with store operations, such as working the sales floor, writing the schedule, holding team meetings, opening/closing duties, etc.

So if your payroll percentage to sales ratio is high, how do you lower the percentage of sales that’s being allocated to payroll?

Increase sales.  That’s a given, but it’s harder to do than it seems.  Most reductions in payroll simply come from better scheduling.

Reduce the number of fulltime employees.  Depending on how busy your store is, you can get away with a manager, assistant manager, and another fulltime employee, maximum.  We had stores running at $1.5MM in sales and scheduled this way.  I fyour sales are considerably lower, and you’re running the store, then you can get away with scheduling the remainder of your employees on a part-time basis.

Schedule shorter shifts.
Often, employers feel bad for employees that have to come in and so they schedule employees for six hour shifts.  There aren’t many retailers that are busy for six straight hours. Most retailers are busy from 11am or noon to 2pm, and again from 4pm or 5pm to 7pm or 8pm.  So why are you scheduling more than one employee to work from 10am to 4pm, when only two to three of those hours require more than one employee?  Bring in one employee from 10-4 or 10-6, and then schedule another from 11-2 or whatever your busy hours are.

You can successfully reduce your payroll just by scheduling more effectively. How are you reducing your payroll to industry norms?

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