Corporate Retail Payroll Budgets

It never ceases to amaze me when I hear customers complaining that employees do not want to help them or saying “they need to hire more people.” Even before the labor shortage, employee assistance was often limited at many stores, especially in the craft industry. I have worked retail for most of my life, but it was eye-opening for me when I shifted from small businesses to working for a corporation. I went from managing a store where three employees per shift on the weekend was “short-staffed” to three employees on the weekend being a dream come true.

While all retail stores are limited on payroll budgets, the craft industry seems to be among the worst when it comes to customer-to-employee ratios. It is common for labor costs to be tied to sales in the retail world, so you need to cut your labor costs if you are not meeting your sales goals. Many customers struggle to understand this: if the customers are not spending money, there are fewer employees to help.

However, there were times that, as a store manager, I needed to either cut my store’s labor hours, even if we had the sales to support the costs, or face the anger of my boss. Running on a skeleton crew was especially true toward the end of either a quarter or the fiscal year. The most stressful time was always Christmas, with the payroll budget slashed to allow only two people per shift in our smaller store, creating lines of impatient and angry customers. It never failed: we had to cut labor hours weeks before Christmas every year, creating more stress than necessary on underpaid employees.

The company had a budget, and if they planned poorly earlier in the year, such as using too much labor to redo sections of the store (“planograms” to those in the industry), or if they estimated that sales would be higher, the stores had to make up that difference by cutting labor. I do not doubt that this is why store managers are salaried: they are expected to work extra to save company dollars. I never worked extra if I could help it and my boss did not like that. My employees needed hours to pay their bills, so I would give them everything I could to keep them afloat and keep them for just a bit longer. Plus I had a life, and the work-life balance was horrible enough outside of the holiday season.

The Math

I have always been for increasing the minimum wage, but when I was a store manager, I had concerns over what that would do to my store. We were given a small payroll budget, usually seven to eleven percent of our weekly sales, depending on tasks for the week. We had a minimum number of hours to schedule (180 hours), and our tasks came out of those hours. Most of the time, that left less than 20 hours for actual customer service, assuming that the tasks did not take longer than corporate allotted. Big hint: they almost always did.

Even with 180 hours, you still had to meet the payroll budget. If you had $2000 a week to spend on payroll, your schedule was likely to go over the budgeted amount for that week. Most employees made between $8 and $9 an hour, with wages capped at $10 an hour for everyone below the assistant manager level. I doubt those numbers are still the same today with the ongoing labor shortage, but they likely are not much higher.

Management’s 45 hours came out of those 180 hours and the $2000 budget, which meant less payroll and hours for hourly employees. The manager often worked as a cashier and stocker while also performing management duties, such as creating the schedule, various paperwork, and answering emails to upper management. The number of times I did the schedule in between customers at the register or sorted corporate’s sale signs…

While I was the manager at that store, I had several employees who were either promoted or received raises — I pushed my boss more than once to put through a raise so we could keep good employees. I had some excellent workers, and I did what I could to keep them, even if it was only for another month or two. Unfortunately, sometimes I had to schedule another employee instead simply because our payroll was too tight. I always tried to be fair: if you were a good worker, you were likely to get more hours, but those who made more sometimes lost a few hours to those who made less simply because I had to make the payroll fit the budget. When I could, I would use paid time off to give them more hours, and I joked with my assistant manager that the solution to our payroll problems was to provide us both with more vacation time.

And there is the concern with a living wage: if that store struggles to schedule employees making $10 an hour, how could it ever afford $15 for each employee? It is not the workers’ fault but rather a flaw in the structures of corporations — a structure that needs to be changed to support the workers.

The Budget

As the store manager, it was my job to review the monthly profit and loss statement, not that I had any control over income or expenses. Corporate controlled all costs except labor, and I couldn’t make customers spend more money, especially when I was always busy doing the job of three people. Our store’s labor cost was always good, sticking close to our labor allotment. Coming from the small business world, this was something with which I was familiar. In a small business, you cannot spend money if it isn’t there, and there is no massive corporation with other stores to support a store spending more than its fair share.

The net operating profit for our store was usually sad. We felt like we always worked our butts off, yet some months the store did not profit; sometimes, though rare, it even took a loss. At first, I felt that my team and I were failing because we did not have enough sales revenue. During the first year, I started to tap into my rusty understanding of business finances and profit and loss statements. I asked questions to learn more about the various lines on the company’s financial statement and better comprehend the costs on the report. I then realized that excess spending from corporate caused our losses, usually in the form of extra inventory that often did not move.

One of the admirable things that particular company did was donate older products to a Kids in Need Foundation partner. These were usually seasonal items that did not sell, but sometimes would be old craft supplies that had been on clearance for months. The donation was where our store always took a big hit as it was an expense on our profit and loss statement. Most of the items were not ones that I would have wanted for our store, knowing that they were not going to sell, or at least not in the amount corporate sent to us. They decided what we would get and when — we had no say over the items we did or did not carry. Merchandise like decorative hay bales would never be a big seller at a craft store in the middle of farm country.

Aside from the undesired inventory, advertising and freight cost were another big part of our expenses. The company eventually shifted from paper advertising to more digital, which did help with the advertising costs. On the other hand, freight costs went up and down throughout the year, forcing us to pay for items we sometimes could not sell. Thus the flaw of corporate retail and why stores are often understaffed: stores have no say over inventory and must incur unnecessary costs.

The Solution

While it may not be the solution to everything, the structure of corporate store budgets is the number one area that needs improvement. Advertising, for example, is in the interest of the entire company, not just one store, so it should come out of a corporate budget. Likewise, freight should not be charged to the stores, especially when freight is moving from the company’s own warehouse out to the individual stores. Removing these two alone would allow more payroll, meaning more hours and higher pay.

The problem with corporations is that upper management makes a lot of money while the people in the stores barely make enough to survive. Companies should restructure their budgeting to adjust for a living wage at the bottom and less money at the top. Does a CEO need to make a million (or more) dollars a year plus bonuses? If companies put that money into the labor budget, we would likely not have as much of a labor shortage as we do right now.

With my store, removing advertising and freight costs would have allowed for at least another 20 hours a week for labor, usually more. The combined profits of all stores within the company more than cover these extra costs, and those profits go to upper management and the CEO. The company had multiple levels of management that seemed like overkill, draining all profits and never investing in the store employees.

Shortly after I became manager, they restructured store manager bonuses so that managers received less. They later restructured them again, making it nearly impossible for the small store managers to receive any bonuses. I always invested my bonus back into my employees, providing snacks and soda, which, according to them, was an excellent idea and kept them from feeling unappreciated.

But what do I know? I only served as the bridge between customers and upper management, the connection to the real world, and the one who saw what was not working and why. Surely corporate knows best.

I left shortly after an argument with my boss about employee pay, with her insisting that employees work to do a good job, not to make money. That store has struggled with staffing issues ever since.

This story was originally published on Medium.