Labour costs are an essential part of any business, including those in the agriculture and horticulture industries in New Zealand. Understanding labour costs is critical to managing your budget and ensuring that you can keep your business running smoothly. This guide will provide an overview of labour costs, the factors involved, and tips for reducing labour costs.
What are Labour Costs?
Labour costs are the total cost of all the work that is done by employees. Labour costs consist of both direct and indirect costs, and within these are two further categories of fixed and variable costs.
Direct labour costs are those that are directly related to producing goods or services. Typically considered the most important of the two cost types due to its immediate correlation with a business’s ability to operate.
Indirect labour costs are those that support the direct labour. Included in this category are HR, sales, marketing, and legal teams. These examples are placed within this category due to their indirect nature regarding the manufacturing of the products or services.
Within the direct and indirect cost categories there is another set of sub-sections, fixed and variable costs. Fixed costs are expenses that do not change, regardless of the number of employees you have. Examples of fixed costs include rent, insurance, and equipment. Variable costs, on the other hand, are expenses that vary depending on the number of employees you have. Examples of variable costs include wages, overtime, and bonuses.
What are the Factors?
There are several factors that impact labour costs for small businesses, especially in the agriculture and horticulture industries of New Zealand. Some common examples include:
- Wages
- Payroll Taxes
- Payroll Software
- Overtime
- Bonuses
- Health Care
- Sick Days
- Holidays
- Insurance
- Benefits
- Supplies
- Training
Tips for Reducing Labour Costs
Reducing labour costs is a priority for many small businesses in the agriculture and horticulture industries. Here are a few tips that can help you lower your labour costs:
Decreasing employee turnover can save a small operation significantly. The costs associated with new employee recruitment, as well as training can be extremely high. Due to the fluctuating workforce size within the horticulture and agriculture sector this can be difficult to achieve. However, where possible re-hiring should be considered during busy season, as well as repurposing employees into different roles, if possible, during downtime.
The upskill of high-performing employees can also reduce labour costs. By investing in the training and development of high-performing employees you enable these employees to fulfil gaps in your operations. This is often a more efficient method when compared to the employment of a completely new individual as existing employees are already immersed within the business’s operations and work patterns.
Offering incentives to employees is another method of reducing labour costs. Employees that achieve certain productivity targets can help increase overall efficiency of business operations. These incentives can include bonuses, time off, or other perks that motivate employees to work more efficiently.
A fourth way to reduce labour costs is through the implementation of technology to automate processes and increase efficiency. For example, using software applications to manage scheduling or automate payroll can reduce the time and resources required to complete these tasks.
What AgriSmart Can Do
When it comes to labour costs a lot of the methods for reducing such costs come down to a change in business practices and operational procedures. Due to the centralising nature of AgriSmart’s workforce management and payroll software, as well as the integration with numerous automated solutions for time tracking, means the indirect labour costs associated with these payroll and operational procedures can be reduced drastically.
By transitioning administration and operational planning into a digital model, all whilst automating a large portion of the workload, small businesses are able to reduce costs significantly through drastic improvement of efficiency.
AgriSmart is designed from the ground up for the horticulture and agriculture industries. We are veterans when it comes to understanding the unique nature of employment and workflow processes within the sector, so compatibility with your operation will never be an issue. There truly isn’t a better application designed for the industry.
Summary
Labour costs are a critical part of any business, particularly in the agriculture and horticulture industries of New Zealand. By understanding the factors involved and implementing strategies to reduce them, small businesses can effectively manage their budget and ensure the long-term success of their operations. AgriSmart offers a guaranteed solution for aiding in these labour cost reductions through industry tailored software.
If you would like to learn more about AgriSmart or jump the queue and arrange a demo, fill out or contact form here or call 0800 110 172
