Controlling Childcare Labor Costs
To accurately balance the financial picture at your school and properly serve the people in your care—from administrative staff and teachers to parents and children—HINGE Advisors believes your occupancy should be at least 70% of your actual licensed capacity. Without this level of occupancy, balancing expense benchmarks for healthy operations can be extremely difficult. Senior administrative staff and lead teachers must be paid regardless of your enrollment levels and filling the last slots in each classroom is where real financial health lies.
Let’s Do the Math
According to our tried-and-true childcare business benchmark, once you’ve calculated your Net Revenue [Tuition Revenue + Other Revenue – Discounts], 45% of this revenue should be going towards your staffs’ salaries when you are 70% full—assuming no owners’ salaries but a Director and Assistant Director(s) as necessary and all other center staff.
In calculating your total staff cost, be mindful that salaries and the number of team members also drive payroll taxes, employee benefits, staff training and miscellaneous staff costs. Payroll taxes are the employer’s share of Medicare and social security alongside all costs of unemployment insurance. And because these expenses are a percentage of salaries, as salaries rise so do payroll taxes. 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 culture-building strategies you do to show your appreciation to your team.
A 3-Part Process
After calculating your school’s full staff costs, you can best manage them within their proposed percentages (50-55% at 70% full) by executing a 3-part process:
Implement a planning tool that assists in setting schedules for your staff so no one works more hours than necessary. Remember that managing every 15 minutes at the beginning and the end of the day matter!
Execute “management by walking around” to manage times when ratios allow for teachers to go home or combine classrooms.
Engage your team in the process so you never waste any resources.
What strategies have you implemented to control labor costs at your school?