Labor Bonus question

We offer a bonus to our shift managers based off of labor percentage (labor cost/net sales).

I’ve been toying around with the idea of offering it based off of number of hours instead of labor cost. They really don’t have any say so in what I pay people, but they have a huge effect on the number of hours someone works. Just wondering if any experience and how it worked out?


The reason people bonus on labour cost/sales is exactly that; to ensure that you match your labour against sales. If you just target them against a set number of hours you have no way to judge profitability if the week/day is busier or quieter than usual.

You could easily do hours per sales in place of wages per sales.

I’ve not sure if I’ve mis-read this. Labour/sales or hour worked/sales will end up with the same proportionate result. Whilst the end number will be different they are ultimately linked to each other

i.e. hours x total of hourly wage = labour cost

hours/sales or labour cost/sale are therefore directly linked.

Either way your managers directly affect the labour cost by controlling the number of hours worked. My preference is to have the total labour cost highly visible so they see how much it costs to run the shift. I’d guess that giving them an target of an hourly amount is one step removed i.e. which is the bigger cost 20 man hours or $150?

We use a labor percent. We come up with an average hourly rate (this includes taxes and work comp) and an ideal pecntage for them to meet. Every six months or so we check the avg. hourly rate. It is amazing how on target it is.

I wouldn’t do hours. There are busy weeks we can be over 40 hours on our labor but still make the percent. If we are slow when they have 40 extra hours they won’t make it.

Our managers have to make labor for two weeks in a row to get the bonus.