Masterclass Recap: Controlling Labor Costs in a Demanding World

HINGE was excited to host 144 attendees from 34 states across the nation during our monthly Masterclass on Tuesday, March 20.

This year’s Masterclass Series focuses on creative solutions to leadership and staffing in your early education business. For March’s Masterclass topic, “Controlling Labor Costs in a Demanding World,” HINGE Founder & CEO Kathy Ligon kicked off the series with financial and operational ways to improve your childcare center’s staffing costs while managing expenses in a healthy way.

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Kathy started by tackling the numbers. What should they look like? First of all, to properly serve the people in your care—including administrative staff, teachers, parents and children—HINGE believes your occupancy should be at least 70% of your actual license capacity. This is what we’ve found to be the minimum healthy occupancy from our years in the industry, and occupancies under that make it very difficult to manage payroll effectively. So to do the math, once you’ve calculated your net revenue {tuition revenue + registration fees + late fees (- discounts)}, according to our benchmark, 45% of this revenue should be going towards your staffs’ salaries when you are 70% full.

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In addition, to calculate your total staff cost, you must also add payroll taxes, employee benefits, staff training and miscellaneous costs to your salary number (suggested percentages for each of these categories, per our benchmark, can be seen in the image on the left). Remember, your payroll taxes are what YOU pay, not what you withhold from employees and send to the government. Employee benefits include anything you provide to your staff at your cost, from life and health insurance to retirement plans, and miscellaneous costs are the very important small things you do to show your appreciation to your team. 

After calculating your staff costs, you can best manage them to keep them within their proposed percentages with a three-part process: 

  1. Implement a planning tool that assists in setting schedules for your staff so no one works more hours than necessary.
  2. Execute “management by walking around” to manage time when ratios allow for teachers to go home or combine classrooms.  The 15 minutes at the end of the day are valuable!!
  3. Engage your team in the process so you never waste any resources.

Want more information? Watch this entire Masterclass here.

Meredith Martin