Managing Labor Costs in the Cleaning Industry: Essential Strategies for Janitorial Businesses

Originally published on September 14, 2023. Updated on April 28, 2025.

Labor costs are one of the biggest expenses for commercial cleaning companies and janitorial businesses, and managing them effectively is essential for long-term success. From wages and salaries to scheduling and productivity, there are many factors that can impact labor costs in the cleaning industry.

That’s why we pulled together various strategies and best practices for managing labor costs in the janitorial industry, helping cleaning businesses optimize their operations and increase profitability. Whether you are a small janitorial service or a large commercial cleaning company, these tips will help you control labor costs and improve your bottom line.

Steps for calculating labor costs

The cost of labor is typically the most significant expense for a cleaning business and business owners since that sum includes wages, benefits, payroll tax, training and operating a human resources team. Because labor costs are some of the biggest expenses for a business, they’re often targeted for reductions.

Researchers estimate that the share of revenue spent on wages will decline as janitorial service providers automate their processes and increase efficiency. To manage labor costs without reducing staff wages, start by calculating direct labor costs:

Step 1: Calculate how much you’re paying your staff in wages (Direct costs like salary or hourly)

Step 2: If you’re paying workers by the hour, determine how many hours will be worked per week and how many overtime hours are necessary 

Step 3: Calculate other labor costs (Indirect costs include benefits, insurance and payroll taxes per employee) 

Step 4: Take those costs and add them to the paid wages amount calculated in Step 1 

Step 5: The previous number is the total labor expense you’ll be responsible for during that calculated period 

Step 6: To determine the labor cost per hour, divide that total labor cost number by the total number of hours your staff will work

Indirect labor costs are generally more complex, as they include accounting, human resources and other operational expenses. To gain the most accurate information for indirect and direct labor costs, perform job costing to maintain a clear picture of your profitability at all times.

How To Reduce Labor Costs

After calculating labor expenses, manage and reduce that number by performing the following steps:

Offer benefits to engage employees and reduce employee turnover

The ability to identify how each job is performing, so that it’s not pulling down the net profitability of the company, involves understanding how much is being spent on benefits. Tracking benefits shows that your company is in compliance with governmental regulations while remaining in tune with the needs of your workforce.

Knowing the real costs of benefits is important for current employee morale and attracting future employees who may ask questions about holidays, time off, health insurance and retirement plans. Other benefits could include meals or, in some cases, equipment and supplies.

Employee benefits account for 29.5% of the average cost per private industry employee, while the remaining 70.5% goes toward wages, according to the US Bureau of Labor Statistics.

It’s common knowledge that a robust benefit package can increase employee engagement, thereby increasing employee retention. But it’s not as widely known that offering benefits while remaining profitable requires a transparent understanding of their costs.

Prevent Wage Creeping

Wage creeping is a popular industry term that refers to when an employee’s salary increases over time, resulting in higher-than-normal pay for a particular position. Cleaning professionals experience a form of wage creeping on job sites when a worker is pulled from one account, where that worker was making more an hour, onto another job site where the rate is lower.

In this situation, an employee may receive an additional dollar per labor hour compared to the agreed rate in the new contract because the previous contract paid them a higher wage. Software solutions that provide job costing and reporting analysis for labor budgets prevent wage creeping and any other indirect costs.

Predictive Labor Analysis for Cost Control

Advanced analytics and AI-powered solutions can transform how cleaning companies manage their workforce expenses. Through integrated business intelligence platforms, you can:

• Analyze historical labor data to predict future staffing needs based on seasonal patterns
• Identify potential overtime situations before they occur
• Recommend optimal staff allocation based on facility size, cleaning requirements and employee skill levels
• Provide benchmarking data to compare your labor efficiency against industry standards

By leveraging these predictive capabilities, janitorial businesses can shift from reactive to proactive labor management, preventing cost overruns before they happen and ensuring optimal staff utilization across all customer sites.

Encourage Improved Productivity

Incentivizing performance is a great way to manage labor costs in the cleaning industry. By offering bonuses, rewards or other incentives based on individual or team performance, employees are motivated to work more efficiently and effectively. This can lead to increased productivity and, ultimately, lower labor costs.

One way to incentivize performance is through a bonus program based on meeting specific goals, such as completing a certain number of jobs in a week or achieving a certain level of customer satisfaction. Another option is to offer rewards for outstanding performance, such as gift cards or extra paid time off.

Additionally, implementing performance evaluations and feedback systems can help identify areas where employees may need additional training or support, ultimately improving their efficiency and reducing labor costs.

Data-Driven Performance Management

Modern analytics capabilities embedded within cleaning management software can provide unprecedented visibility into employee productivity metrics, allowing managers to:

• Track cleaning time per square foot across different team members
• Identify top performers and understand what makes them efficient
• Pinpoint training opportunities for underperforming staff
• Set data-backed performance goals based on actual productivity metrics rather than estimates

By basing performance management on concrete data rather than subjective assessments, cleaning companies can develop more effective training programs and incentive structures that directly address the specific factors impacting labor efficiency.

Minimize Overtime Pay

Managing labor costs through budgeting and diligent employee scheduling efforts also prevents distributing too much overtime pay. For instance, imagine a cleaning company where the average direct and indirect labor costs are roughly 70%. That means 70 cents on every dollar go toward wages, benefits, payroll tax, cross-training and operating a human resources team.

Also, assume that the same company is operating at a gross profit of roughly 20%. Then there are only 10 cents left on each dollar to cover business operations, administrative costs and office expenses. So, a few extra cents per hour spent on preventable overtime hours add up very quickly and can take away from your overall profitability.

Scheduling software offers support in terms of reviewing issues with overtime before they occur. More specifically, it gives managers the resources to quickly acknowledge where overtime is being distributed unnecessarily. Alerts or notifications can be sent to professionals who can proactively make scheduling adjustments before profits are lost.

Optimize staff scheduling based on business needs

Creating efficient staff schedules is crucial for controlling labor costs. By analyzing patterns in customer demand and cleaning requirements, you can optimize your workforce allocation during busy periods while reducing labor hours during slow times.

Effective scheduling helps ensure you have the right number of workers for each shift without overstaffing. Employee scheduling software can make this process much more efficient by providing tools for shift planning and time tracking while helping managers balance employee availability with business needs.

Implement Cross-Training to Increase Workforce Flexibility

Cross-training employees to perform multiple job functions creates a more flexible workforce and helps control labor costs. When staff members can handle various tasks, you can operate with leaner staffing levels while maintaining service quality.

Develop a structured cross-training program that identifies key skills needed across your operations and systematically trains employees to master these skills. This approach enhances operational efficiency while improving employee productivity.

Compliance

Cleaning certain sites may require specific skills. For instance, janitors who work in hospitals may need specific training. Also, during COVID-19, it was common for companies to ask for vaccination records for staffers cleaning their sites.

Clients may still want your workers to provide COVID-19 records, or customers may want your staffers to perform cleaning standards set by OSHA, even after the pandemic. A compliance tracking system can keep track of certifications, licenses, experience and other requirements. You can assign those compliance standards to certain jobs or tasks.

In the future, you might need to show proof that your employees have certain certifications. Being able to handle those types of requests is an indirect way to manage labor costs, as it could help win bids, which could lead to more repeat business.

Reduce Labor Costs with Cleaning Management Software

Cleaning management software can be a valuable tool in reducing labor costs in the cleaning industry. This software solution offers various features that can help streamline operations, improve efficiency and ultimately save money on labor expenses.

Cleaning management software can reduce labor costs by optimizing scheduling. By using the software to create efficient schedules based on workload and employee availability, managers can ensure that the right number of staff is assigned to each job, minimizing overtime and reducing labor costs.

Advanced Analytics for True Labor Cost Understanding

Beyond basic job costing, today’s cleaning companies can leverage advanced analytics platforms to gain deeper insights into labor efficiency:

• Real-time dashboards: Monitor key labor metrics across your entire operation through customizable dashboards showing critical KPIs
• Anomaly detection: Automatically identify unusual labor cost patterns that might indicate inefficiencies or errors
• Correlation analysis: Understand how factors like facility type, cleaning frequency and staff experience level impact labor productivity
• Scenario modeling: Test different staffing approaches virtually before implementing them in the field

These capabilities transform raw data into actionable business intelligence, allowing cleaning business owners to make truly informed decisions about their most significant expense category.

Enhancing Operations with Integrated Business Solutions

Implementing comprehensive business management software for your commercial cleaning operations can deliver significant benefits through tightly integrated functionality. By leveraging an integrated ERP, for example, you can gain:

1. Efficient Workforce Management: Easily schedule shifts, assign tasks and track employee performance, ensuring that your team is working effectively and efficiently.
2. Real-Time Communication: Enable quick responses to client requests or changes in cleaning requirements through mobile-accessible platforms that connect office staff with field personnel.
3. Automated Financial Processes: Streamline your entire accounts payable process from invoice to payment while generating cash rebates on virtual card payments, transforming your financial operations from a cost center to a revenue generator.
4. Powerful Business Intelligence: Access industry-specific KPIs and benchmarking data to compare your labor efficiency against industry standards, identifying opportunities for improvement and growth in your janitorial business.

Wrapping up Labor Costs

Managing labor costs in the cleaning industry is essential for maintaining profitability and growing your business. By implementing scheduling software to prevent unnecessary overtime, tracking compliance requirements and utilizing integrated cleaning management solutions, you can streamline operations, improve efficiency and ultimately save money on labor expenses.

The future of labor cost management will be a mix of integrated ERPs, automated job costing, predictive analytics and AI-powered insights that provide cleaning businesses with unprecedented visibility into their operations. 

By adopting integrated business management solutions for your janitorial business, you can effectively manage labor costs while optimizing operations and growing your client list. These comprehensive platforms help ensure that your business remains competitive in the cleaning industry while maximizing profitability.

Contact us today to learn more about job-costing and budgeting capabilities that can help your business better manage your labor costs.