Ways to Reduce Labor Costs in the Security Industry: A Guide
Control your biggest expense — labor costs — by focusing on electronic timekeeping to drastically cut time theft and improve your security company’s financial health.
The security guard industry operates on notoriously thin profit margins, and security contractors face enormous pressure to minimize overhead expenses while maintaining quality of service. For any security services business, labor is always the largest expense. And, with rising minimum wage requirements and competitive wages necessary to reduce turnover rates, controlling labor costs becomes even more essential for maintaining healthy profit margins. Here are three powerful strategies to help security businesses optimize their labor costs without compromising service quality.
1. Digitize Your Timekeeping for Better Security Operations
You can’t control your security guard costs if you can’t accurately track labor hours.
Many security businesses still record their security personnel hours manually, leading to incorrectly logged hours, time-wasting administrative tasks, and—worst of all—opening the door for time theft that directly impacts your profit per guard. When implementing advanced security management software with digital timekeeping, you gain real-time monitoring of attendance information so you know which security staff are on site—helping to prevent overpaying for “false time.”
Professional security services require timekeeping solutions that match the unique environments where guards operate. With something as simple as a landline telephone, you can use designated phone numbers and employee ID numbers to clock your security guards in and out in a matter of seconds, verifying their location with Caller ID. Mobile timekeeping lets your security personnel use their devices to clock in and out with GPS verification, which is particularly valuable for event security or clients with multiple sites. Biometric technology is especially useful for high-security locations and is effective in preventing buddy punching—a common challenge in the security sector. Use fingerprint readers, finger vein patterns, or facial recognition to ensure your security staff are physically present – and not buddy punching or committing time fraud – when clocking in and out of shifts.
Why Advanced Timekeeping Software Matters
Advanced timekeeping solutions do more than just track basic clock-in/clock-out times. They create a reliable system of record that can significantly reduce labor costs through accuracy and automation. Purpose-built security industry software can automatically handle complex scenarios like lunch deductions based on shift length. Instead of manually calculating lunch breaks (which can vary based on duration worked), the system applies appropriate deductions according to predefined parameters—ensuring consistency and compliance across all job sites.
For instance, an effective timekeeping system can be configured with customized lunch parameters that automatically deduct specific amounts of time based on the length of the shift worked. When an officer works between 7-10 hours, the system might automatically deduct 30 minutes, but for shifts over 10 hours, it could adjust to a 60-minute deduction—all without manual intervention and with perfect consistency.
The right timekeeping software also helps maintain billing accuracy. When security companies invoice clients based on actual time worked, having precise electronic records prevents billing disputes and ensures you capture all billable hours. Additionally, for companies managing guards across multiple sites, telephone verification systems can integrate with your timekeeping system, allowing guards to clock in from remote locations while still providing verification of their presence without requiring additional supervisory staff.
2. Prevent Overtime Before It Starts: Essential for Security Guard Services
Overtime is arguably the number one profit-killer for security guard firms, particularly when it’s not included in your billable rates to clients. When hourly rates and wages consume over half of your revenue, controlling overtime becomes critical for maintaining healthy profit margins in the security industry. The secret to reducing these labor costs? Stop overtime before it happens through smarter shift management.
If you’re still using paper (and yes, that includes spreadsheets) to schedule your security guards and track their time across shifts, you typically can’t spot overtime problems until after they happen. With effective security operations software in place, you gain visibility into weekly schedules and can spot potential overtime situations before they impact your security expenses.
For example, using an integrated time and attendance and scheduling software purpose-built for security guards allows you to quickly identify when security personnel are approaching overtime thresholds. This is especially important when managing guards with different qualifications or tenure, where overtime can make a bigger impact fast when concerning those with higher hourly rates. As an added benefit, advanced scheduling tools help you assign the right security staff based on client demands, qualification requirements and site-specific factors.
Proactive Overtime Management Through Software
Specialized security industry software offers predictive overtime warnings that can transform how you manage labor costs. For example, running an Overtime Warning Report before a work week begins gives operations managers the opportunity to identify potential overtime situations and redistribute hours among other employees. This proactive approach can potentially save thousands in unnecessary labor costs each month by alerting you to problems before they impact your bottom line.
What makes these reports particularly valuable is their ability to distinguish between billable and non-billable overtime. This distinction is crucial for security companies operating on thin margins. By designating an “Overtime Hours Limit” in your system and selecting whether to include or exclude billable overtime from your analysis, you can focus specifically on the overtime that’s directly impacting profitability. This level of visibility allows managers to address contract terms, adjust staffing levels or implement other corrective measures for jobs with high non-billable overtime.
The right overtime management system also offers filtering capabilities to analyze overtime by job or by employee, allowing you to identify whether excessive hours are tied to particular contracts or individual officers. This granular insight helps determine if the issue stems from understaffed contracts, inefficient scheduling practices or individual employee performance patterns that need addressing.
3. Make the Most of Reports and Budgets to Control Security Costs
While monitoring time and attendance and reducing overtime can help you make a dent in your annual labor costs, security company owners also need to review data regularly to optimize their security budget. When you can quickly identify issues in your security operations, you can implement cost-saving security strategies that protect your profit margins. Dynamic reports that go beyond basic spreadsheets allow you to find bottlenecks in your security processes, overtime patterns, unpaid invoices and other factors affecting your financial health.
A security management system can generate comprehensive labor data that can be tracked daily across all security services. Each day, security experts should review reports of the previous day’s labor, broken down by client and site. The goal of these daily reviews is to ensure security expenses don’t exceed your security budget, while at the same time verifying that security personnel aren’t neglecting client expectations, which could lead to quality of service issues. Similarly, proactively managing security staff schedules through detailed reports helps you control labor costs and identify potential gaps in coverage before they affect your ability to deliver on service level agreements. This provides you and your clients peace of mind on quality of service and contract completion.
Comprehensive Job Cost Analysis for Strategic Decision-Making
Arguably the most valuable reporting solutions provide comprehensive job cost analysis that compares actual costs against budget figures. An effective job costing analysis system draws data from multiple sources, including daily labor budgets, ticket budgets and general ledger budgets to provide a complete picture of job profitability at any point in time.
The ability to drill down from summary reports to specific transaction details enables security company managers to investigate variances immediately. For example, if the report shows labor percentages appearing unusually high on a particular job, you can drill down to determine whether certain services weren’t properly invoiced or if the job is truly running over budget. This level of insight enables managers to take corrective action immediately rather than waiting until it’s too late to recover costs.
Beyond basic reporting, advanced systems allow for exception-based management through budget filters and customized tiers. This means you can quickly identify only the jobs that are performing outside of acceptable parameters, focusing your attention on the contracts most in need of intervention rather than reviewing every job. Creating templates for frequently needed reports ensures consistent monitoring of key performance indicators without requiring staff to rebuild complex report parameters each time they need information.
Conclusion: Securing Your Security Company’s Financial Health
As profit margins grow even tighter, it’s imperative for businesses to think intuitively about how to lower security guard expenses without compromising on the ability to deliver on a contract. As minimum wages rise and the cost of living increases across the country, labor costs will likely continue to be your biggest expense, so implementing these strategies can help you provide cost-effective security solutions while protecting your profit margins.
Interested in seeing a tool that can do all of this for your security business? Chat with us about seeing our WinTeam solution in action.
For additional tips on optimizing your security company’s financial health by reducing overtime hours, check out The Security Contractors’ Guide to Reducing Overtime.