3 Ways to Reduce Retail Labor Costs Amid Holiday Hiring

The holiday season is on our doorstep, and as retailers are tying a bow on their plans for the busiest time of year, they’ll be paying particular attention to one crucial element: people.

Between wages, administrative costs, taxes, benefits and training, labor expenses add up quickly and account for as much as 70 percent of a business’s total operating costs. While it’s tempting to be as lean as possible on holiday hiring, retailers must have enough workers on staff to accommodate demand. For small businesses especially, a successful holiday can determine whether it meets its revenue goals for the year. To bring in new talent, retailers must offer competitive pay and a positive employee experience that will keep workers on staff throughout the season.

Don’t let labor costs prevent you from attracting top seasonal talent. Here are three ways to keep expenses low without skimping on wages:

1. Plan now.

Every retailer should head into the holiday season with an accurate picture of their current labor costs. This way, you can see how they stack up against other business expenses as well as projected holiday revenue to help determine how many new employees you’ll need to hire and in what roles. For retailers operating on a shift basis, it’s also helpful to break down labor costs by hour to maximize accuracy — and ultimately, savings.

Strategically managing your labor costs ahead of the holiday season will provide a strong framework not just for the impending rush, but also for the long term.

2. Streamline scheduling and payroll.

The influx of new employees can throw a wrench in your regular scheduling processes. Fortunately, the same best optimization practices apply even when there are new names on the roster. If you haven’t adopted a schedule optimization strategy yet, this season is the perfect time to start.

There are plenty of software programs on the market that help retailers to optimize schedules automatically or make targeted scheduling recommendations based on demand, sales forecasts and employees’ availability.

Similarly, once employees are actually on shift, using advanced time clocks can help with monitoring and minimizing labor costs. Ensuring employees are not working unauthorized overtime and recording their exact amount of hours worked will streamline other processes like payroll, saving you time and money.

3. Invest in the employee experience.

Increasing employee-related expenses in some areas can drive down costs in others. Providing better benefits — whether that be higher compensation or flexibility in scheduling — will hopefully open up your talent pool to attract experienced, high-performing hourly workers who will help ensure your business has a successful holiday season.

These investments will also lower the likelihood of employee turnover — a chronic problem in retail. High turnover can increase labor costs and lead to understaffing, making it difficult to meet holiday demand. This then creates even more drain on the business in the form of lost revenue and hindered employee performance.

Maintaining a positive workplace culture can also reduce turnover costs. When employees like their jobs and their coworkers (ranked as the No. 1 factor for job fulfillment, according to Homebase research on hourly workers), they’re more likely to show up and deliver their best. Building camaraderie can be difficult with a temporary seasonal team, but showing respect and appreciation will go a long way. After all, a little holiday cheer never hurts.

The holiday rush is an opportunity to breathe new life into your retail business. Managing labor costs by streamlining processes and investing in the employee experience will not only reduce holiday labor expenses, but help to set the foundation for success in the new year.

Rushi Patel is the chief revenue officer and co-founder of Homebase, the all-in-one team management app making work easier for 100,000-plus small (but mighty) businesses.