Labor vs. Sales Reporting - Is it ACTUAL labor costs?

[midnightferry]

Howdy, 

We're ice cream stand and use Square POS for sales and Square Payroll. Employees clockin/out and we process payroll through Square. These are tipped employees. 

In the Labor vs. Sales report, how can tie out the labor number. Say on 7/23, it tells me the sales are $3065 and labor is $693.

Where can I go find this $693 amount? I've already processed the payroll, so does this include employer taxes? Are tips included? 

In other words, how can I verify the accuracy of the Labor Costs amount in this report? And is the actual Payroll cost for that period, or an estimate generated by Square to provide a general sense of Labor vs. Sales. 

[TheRealChipA]

Hi @midnightferry.  Let’s take your questions one at a time.

First, labor costs are ONLY the hourly pay as defined for each of your team members.  So, if you have three employees at 6pm, two of them $10 per hour and one $15 per hour, your labor cost shown on that report for a full hour will be $35.  

In the “Labor vs sales” report, payroll taxes and tips are not included. Payroll taxes are not known, obviously, until the payroll is run.  Tips, since they are pass-throughs and not actually true labor costs that we pay, are not included, either.

Second, the labor numbers on that report can be found by going to Shifts -> Labor & tips from your dashboard.  That will show you total labor cost, as well as tips earned that day.  You can download CSVs of both Labor Cost and Shifts (timesheets) here.

As an aside here.  I use this Labor Cost report daily to help determine my payroll liability.  I know that my employer taxes add about 12% to the labor cost that Square shows, so I just calculate and estimate that for this purpose.  Between labor cost, estimated employer taxes, and the tips earned I get a reasonably correct number of my payroll liabilities for that week.

I hope that helps you understand the difference between “labor costs” and “payroll costs” as defined in Square reporting.  I’m very available to assist in pointing you to the correct CSVs and even help you set up something to help you track theoretical “payroll costs” on a day-by-day basis.  I do this so that I’m sure I sequester the correct amounts for my next payroll, and have done it for years now.  Just let me know.  

[Helloduff]

I have to be mis-reading above - there is no way that your payroll tax obligation is 12% of payroll.  I have about 600k in annual payroll.  Are you suggesting my additional tax is 70k? 

[Donnie-M]

@Helloduff I think I am probably misnomering what I was meaning.  I was factoring in taxes, unemployment insurance, and benefit costs (i.e. short term disability employer paid healthcare vacation days holidays etc.)  All of that actually represents true labor costs.

[Donnie-M · Accepted solution]

@midnightferry The labor cost report takes the hours worked x the dollar per hour paid to the employee to get the $693 figure (This would also reflect overtime).  The labor is then calculated versus sales (labor / sales) to get the percent.  It does not include payroll cost/taxes/tips etc.  Tips are excluded from sales and are only part of the total collected for a day and don't represent any sales.

Generally speaking, I get where you are going with this, your actual labor cost is higher when you include taxes, workman's comp insurance, benefits etc.  The labor report gives you a good idea of where your labor is in real time, rather than 1 or 2 or even 6 months later from a p&l statement.

While I wouldn't call it a "general sense" number, labor is a controllable cost, where taxes/insurance/benefits, are really non-controllable labor cost.  You cannot affect those numbers as they are directly related to the hours you spend.