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Labor costs are one of the highest expenses in restaurants, encompassing payroll, taxes, insurance, and more. This guide outlines controlling labor expenses, focusing on payroll management, turnover rates, and maximizing productivity. Learn to forecast sales, schedule effectively, and monitor labor costs to ensure optimal operations. Discover how to draft a labor pro forma to predict income and needed staffing. Gain insights into employee pay structures, including salaried and hourly wages. Implement best practices to manage labor costs while maintaining high service levels.
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Labor Controls • In most restaurants, labor is the second highest cost of sales. • The total of all costs associated with maintaining a workforce • This includes Payroll
Payroll • The gross pay received by an employee in exchange for his or her work. • Payroll is only one part of labor expense
Other expenses of Labor • FICA Taxes • Unemployment Taxes • Worker’s Compensation • Health Insurance • Pension Plan Payments • Employee Meals • Vacation/Sick Leave • Employee Incentives and Bonuses
Payroll • Salaried Employees • Receives the same income per week or month regardless of the number of hours worked. • Fixed Payroll • The amount an operation pays in Salaried Employees • Variable Payroll • Those dollars paid to hourly employees. • Added in relation to the number of guests anticipated to be served. • Management has nearly 100% control over variable labor expense.
Turnover rate • Turnover rate • (# of employees separated / # of employees in workforce) = Turnover Rate
Steps to managing Labor • Know your peak periods of business • Place your best employees where they will be most productive • Watch time in’s and time outs • Cross-train your staff • Monitor labor costs hourly • Communication with FOH
Managing Payroll • 4 Steps to managing Payroll Costs • Determine Productivity standards • Forecast Sales Volume • Schedule employees using productivity standards and forecasted sales volume • Analyze results by comparing the actual costs to the budgeted cost
Preparing a Labor Proforma • What you need to know • Budget • Tables, chairs per table, PPA, days open, turns • Average Pay Per Employee, average # of hours per week per employee • Productivity goal
Preparing a Labor Proforma • Step one… • How much money will we make? • Tables X chairs X turns X PPA X days open
Step 2 • How many Employees will we need? • Income / Productivity Goal / hours per week per employee • (add 20%)
How many hours can we spend? Divide the income you expect to make in 1 week by 70 (productivity goal)
Writing the schedule • Next, divide the hours available into the days you are open for business. • Use more hours on busier days • Write your schedule, not exceeding the number of hours allotted
Productivity versus Labor cost • Productivity- a clear picture of how productive your kitchen is, excluding factors and excuses such as • Everyone is on overtime • All the highest paid employees are here • income for that department / # of hours worked
Performa is a tool • A Labor performa is a tool, when used properly, it can help generate a good labor cost, however, it is not the total picture. Insure you have enough labor to properly care for the guest.
Averages • Cooks $7.25 to $12.00 • Dishwashers $7.25 to $8.00 • Waitstaff $2.13 + • Trainers $4.00 + • Hostess $4.00 + tip or $8.00 • Bartenders $5.00 + • Managers 30k to 45k
Overtime • Any hours worked past 40 is time and a half • DOL.gov
