My Payroll Costs Are Too High

Payroll is more than hourly wages or salaries. The full cost can include employer taxes, workers’ compensation, insurance, benefits, paid time off, overtime, payroll service fees, training, uniforms, vehicles, tools, unproductive time, and mistakes or rework. The goal is not simply to cut people. It is to know the true labor cost, price work correctly, schedule responsibly, improve productivity, and pay workers fairly and on time.

• Prices were set using wages instead of the full burdened labor cost.
• Hours are not tracked by job, customer, department, or type of work.
• Overtime is discovered after payroll closes instead of managed during the week.
• Crews lose paid time to travel, waiting, missing materials, unclear instructions, rework, or poor scheduling.
• The company hired before recurring sales and cash flow could support the role.
• Owners do not review payroll as a percentage of revenue and gross profit each pay period.
• Employee classification, payroll taxes, insurance, or required benefits were not planned correctly.

1. 1.What was total payroll for the last four pay periods, including employer taxes, insurance, benefits, overtime, and fees?
2. 2.What percentage of collected revenue went to payroll in each of those periods?
3. 3.Which jobs, customers, crews, or departments produced enough gross profit to cover their labor?
4. 4.How many paid hours were productive, billable, travel, waiting, training, rework, or overtime?
5. 5.Are estimates using realistic labor hours and the full burdened hourly cost?
6. 6.Is overtime approved before it happens, and what is causing it?
7. 7.Are timecards accurate, submitted daily, and connected to the correct job?
8. 8.Can current cash cover the next two payrolls and the related tax obligations?
9. 9.Would better scheduling, training, equipment, routing, or job preparation remove wasted hours?
10. 10.Before changing pay, hours, classification, or staffing, have you checked applicable employment and tax rules with qualified advisers?

1. 1

   Calculate the fully burdened hourly cost for each role or crew, not just the wage.

2. 2

   Track every paid hour to a job, customer, department, or clearly named non-billable category.

3. 3

   Compare estimated labor hours with actual hours after every job and update future estimates.

4. 4

   Set a weekly payroll dashboard showing payroll dollars, payroll percentage of collected revenue, overtime, billable utilization, gross profit, and cash needed for the next two payrolls.

5. 5

   Create written rules for time entry, overtime approval, scheduling, job preparation, and payroll review.

6. 6

   Improve the process causing wasted labor before reducing people or pay.

7. 7

   Review staffing only after measuring demand, capacity, productivity, cash flow, and legal obligations.

8. 8

   Have a qualified payroll, accounting, insurance, or employment professional review classifications and compliance questions.

9. 9

   Consider a payroll service like ADP, Paychex, Gusto, or QuickBooks Payroll. PROS: they calculate and file your payroll taxes for you, handle quarterly and year-end reports (W-2s, 940s, 941s), run audits and keep you compliant, many offer pay-as-you-go workers' compensation bundled with payroll so you pay premiums based on actual wages instead of a big upfront deposit, direct deposit and employee self-service save you hours, and using your own account keeps your payroll history in one place. CONS: monthly fees plus per-employee charges add up as you grow, you are still legally responsible if they make a mistake, customer service can be slow when you have a problem, contracts and add-on fees can hide costs, and it does not fix the real issue if your prices do not cover your true labor cost. A payroll service handles the paperwork — it does not make payroll affordable.