Calculating Average Wages for Hiring and Pricing

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Ok, let's face it. Prices for EVERYTHING are going up! Through the end of Q1 in 2024, rents have increased by 5.8% compared to the year prior. Food is up 2.2%. Energy costs are up 2.6% (utilities included). Fuel is up 3.1%. Transportation costs are up a whopping 11.2%. Services are up 5.2%. Well, I could go on. It's not getting easier any time soon.

What does this mean? It means that the financial demands placed on the labor market are disruptive now more than ever. If you have anyone working for you, as a subcontractor or employee, you've likely already faced requests for increases. Your workers are being squeezed at home, and the first place they'll come to for more money, is you. 

It's important more than ever that you track average wages and use these averages to calculate a wage that locks in your workers and keeps them around for some time to come. The overall inflation rate year over year ending in March 2024 is 3.5%. Average wages during the same period increased 4.7%. If you haven't increased wages by that much, on average, your competitors have increased and you could lose workers to your competitors or to other employers outside the cleaning industry. 

We calculate average wages for 2 important reasons...

1) We want to ensure the best client pricing; our prices are wage-centric.
and 2) If we offer a wage that's above average, we can easily hire and keep top talent.

When we calculate average wages, we look on job sites like Indeed. Let's say we need to hire for a nighttime janitor for 20 hours per week, or about 4 hours per day. We set the search for job postings within the last 14 days, within 10+ miles, part-time, and I'll use a combination of search terms like cleaner, cleaning, janitor, janitorial, custodian, and more. I'll enter those values into a spreadsheet, and then I'll create an average based on part-time employment opportunities. Here's what I got:

What you are seeing here is a simple spreadsheet using my computer's software. I went through 100 or so jobs using those search terms. I wrote down the employers and wrote down their wages. 

In the above, I initially didn't care if the job offered was full-time or part-time. I also didn't care if the work was in the day or the evening. I sketched them all down. Why? I didn't know how many results I'd get. I wanted at least 10, and as you can see, there were a lot more that fit Parttime -AND- Nighttime work. But in the end, I found 11 employers willing to hire part-time (20 hours per week or so) working in the evening. As you can see, the average wage for this area for PT and night work was $14.67/hour. 

I EXCLUDED any jobs that were supervisory or managerial in nature. I excluded (though initially sketched down) any work that requires a Top Secret clearance (I'm in the DC area). I excluded any jobs that didn't include a published rate. And I excluded any cleaning job that had blended roles like stripping and waxing, or other specialty floor work. 

So...$14.67/hr as of this blog post. To calculate an average wage, I round that up to $15.00 and I add $1more to that average. The result is $16. I want to pay $16/hour for part-time cleaning in the evening and I can legitimately say that I pay above average. If I pay $16, I will pay equal to or higher to all of them, but 1. My odds of attracting top talent are much higher than my competitors if I paid that at this moment in time. Plus I can add perks to my job ads to make the deal sweeter like paid time off as well as holiday pay, as well as flex schedules.

Just this one technique kept our average employee around for over a decade!! We also use this average in our pricing for new contracts. Be sure to check this blog post out for more information on pricing.

As a side note, I will look at other things besides wages. I'll look at the overall economy and labor market. I'll look at new laws like minimum wage increases. For example, Virginia already signed into law a wage increase to $15/hour. It's $12/hour now. So I want to keep ahead of the curve and offer $3 more than the current average once that change takes place. So if you ask me what my wages could be like in 3 years, I'll tell you it'll be around $19, with all else being equal. 

Finally, I look at what wages are doing elsewhere in our area. In Virginia, minimum wage is currently $12. In DC it's $17.50/hour. In Montgomery County MD which borders DC and VA, it's $17.15/hour. So, the closer I go to the Potomac River, the higher the wage I need to factor in. I cannot pay my $16/hr wage if all the worker has to do is drive 5 minutes over the bridges. I also look at when these wage increases took place. They just changed this month, meaning that wages will be the closest to this minimum for some time to come.

I hope this helps you in pricing and winning long-term employee relationships, and keeping your pricing competitive and profitable.

Next on Deck: Ultimate Lead Guide - Finding Gyms (8/14/2024)