Business

The labor market and your funeral home

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Over the weekend I read some articles pertaining to the secular world of business that I have tried to boil down to how they will affect the death care profession/industry.  One article from Yahoo Money is entitled “Making sense of the Twisted Sister labor market“.  You can read it here.

That article points to what it calls the “Great Resignation” and how leaving the labor force for many is both stressing out workers left behind and giving those workers some great opportunities at the same time.  Here are a couple of quotes from that article:

  • “. . unfilled jobs are near a record high, unemployment claims hit yet another pandemic-era low —- but workers appear to be in a particular foul mood.”
  • “. . strikes and support for organized labor are on the rise.”
  • “. . workers are not only quitting at historically high rates, they’re being increasingly choosy about picking their next jobs.”
  • “Demand is strong, and prices are rising everywhere, but so are wages, as desperate employers trip over themselves to hike pay in a bid to retain and attract talent.”
  • “Companies are paying more, which has the ancillary effect of boosting demand and price pressures.”

The article also touches on three reasons for the “long-term” inflationary pressures:

  1. Less support for “globalization” (Globalization of the work force has the effect of keeping wages down)
  2. The shift away from fossil fuels (fossil fuels available in great quantity keep  costs down for producers)
  3. Declines in the working-age population (coupled with more Senior-age workers choosing not to work) causes labor shortages.

So, how do I think these items will affect the funeral service workforce?  I think that there are, potentially, very interesting ramifications.  My experience, says that more so than many other occupations, funeral service is not about the money.  Working conditions, call schedules, the opportunity to have some authority, and the opportunity for gratification of helping fellow human beings are all elements that enter into why an employee will work where they do.

If you operate a funeral home with multiple employees you need to take stock of how those items are facilitated in your business.  And, it also goes without saying that you have to look at where you stand as far as financial compensation as well. . . .because as wages in other occupations rise, it just won’t be the other funeral home that you may be in for competition for employees.  Semi-truck drivers coming out of our local technical college are now receiving starting pay of around $65,000.

Now let’s assume that you are having to raise wages and benefits to make sure you have the qualified employees you need to carry on your business.  What will that do to your bottom line?  With everything else being equal, it will cut into your margins making your final profits less.

Tom Anderson
Funeral Director Daily

Or, you could raise prices to retain that margin.  But if you do that, what might happen to your mix of business?  Will some consumer clients then opt for lesser services instead of paying the increased price of the service they would have chosen otherwise?  That might cause profits to go south in a hurry.

What might I do if I was managing a funeral home in this situation?  Raising wages is one idea, but doing that might lead to lower margins or higher service prices, or maybe a big change in case mix.  My guess is that I would try to incentivize my employees in another way.  Here are a couple of ways that I might try without permanently putting salary increases on the board until we see how the labor issues all shake out.

  1. Some type of non-discriminatory profit sharing plan.  There are ways in a 401k type arrangement that may be able to include owners as well as full-time employees.  It may work out that what one might pay in taxes on a direct payment to an owner could go to employees instead in the right type of plan.  The negative impact on this to an owner is that the money cannot be withdrawn until age 59 1/2, but it may be a way in which your employees can benefit financially without raising regular pay.
  2. Some type of bonus for extra calls over a average number.  Let’s say that you average 100 calls per year, maybe you give each employee an extra $2000 if you reach 110 calls, another extra $2000 if you reach 120 calls and so on.  This type of arrangement compensates employees for extra work and you don’t have to pay it unless you are busy and have the cash available.  It might stop you from having to hire that extra staff member.

I always had a “Bonus Call” plan when I was managing my funeral home.  And, I was never sorry in paying out the bonuses.  Let’s say, as above, your first bonus of $2000 per full time employee is when you hit 10 calls above average.  Let’s also say that you have four full-time employees.  That’s an $8,000 cost. . .but ten extra calls, with fixed costs remaining static, at a $3500 average margin is $35,000. . . so you still, as an owner are ahead $27,000 . . . and you have happier — and probably longer tenured employees — over the long run.

Those are just a couple of my thought processes that might help on the financial end of employee retention.  There are certainly many more and whatever you can do with flexible work schedules would also be welcome and potentially help with employee retention.

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