Your payroll is the first hiding spot to check when searching for weak spots in your KPIs. Not only is it the easiest to change because it’s in your complete control, but it’s also relatively simple to calculate. We fully understand that your employees are the heart of your pharmacy, and supporting them the best you can is always a priority. However, a bloated payroll will damage your pharmacy and hurt everyone in the long run. We know that pharmacy owners are usually the kindest, most giving people out there. You joined this field to help people! You want to hire multiple people and offer significant yearly bonuses. But letting that generosity inflate your payroll can creep up on you over time, and suddenly you’ll see that your revenue and payroll ratio is entirely out of control. Calculate Your Payroll Ratio You need to review these numbers consistently to ensure your payroll ratio stays in the green zone. We have the key numbers you must know when evaluating your payroll ratio. Add up all your payroll costs, including salaries, bonuses, taxes, benefits, and insurance for all revenue-generating employees. Then, divide your total payroll costs by your total revenue for the same period. The number you get is your payroll ratio. Empower Your Team and Your Bottom Line Strategies for Lowering Your Pharmacy’s Payroll Ratio
the performance of your pharmacy. Once you calculate your payroll ratio, you can determine how much payroll you need to cut or how much your revenue needs to increase by. It’s a simple math problem! If you want to keep every team member, you must find a way to lower your payroll costs or increase your total revenue. Clearly, increasing your revenue is the preferred option, and we have ways to get this process started. But to see faster changes and lower your payroll ratio, making cuts may need to happen first. You can do this by cutting back hours, adjusting wages, or optimizing your team’s schedules. Reducing your team’s hours by one to three hours a week per employee can make a huge difference in your payroll ratio without significantly impacting any single employee.. Practice complete transparency and share your new goals to balance revenue and payroll with your team. If you need to reduce wages, start offering performance-based bonuses that allow team members to make up the difference. You can also create a team goal to increase revenue to get payroll back to where everyone wants it to be. Not only does this increase job security, but it keeps everyone accountable. We understand that you likely don’t want to fire anyone, and you don’t have to. Essentials and Unlimited members have complete access to our payroll ratio KPI course, which will allow you to calculate how to keep your team and balance your payroll. We’ll walk you through the whole process and crunch all the numbers together. You can access this course through your online dashboard or scan the QR code!
Total Payroll Costs ÷ Total Revenue for same period = Payroll Ratio
Now, multiply your payroll ratio to get a percentage. Here’s the benchmark:
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Red > 14%
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Yellow = 13-14%
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Green <13%
You want less than 13% to be in the green, but if you want a high- performing pharmacy, you need that ratio to be less than 11%. How Can You Lower Your Ratio? We are all for supporting employees and giving them the best possible wages and benefits. However, this must be based on
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