Is Managing Labour Costs Giving you a Headache?

Twenty percent. That’s the commonly accepted percentage of labour costs to sales in the restaurant industry. It’s easy math:

Sales ÷ payroll = percentage of labour costs to sales

for any given time period.

Sales is the unruly member of the equation. It changes season to season, day to day, hour to hour. Payroll is much more well behaved, much more predictable. And it’s that part of the calculation we’re going to talk about today: managing labour costs.

Labour costs are best controlled when:

  • Performance is monitored in deep detail.
  • It’s based on accurate sales forecasts
  • Staffing is precisely matched to that forecast.
  • Staff knows how—or is taught—to do more than one job at a time.

Wait staff performance

Labour costs are controlled when time and attendance, length of breaks, sales per shift, preparation time are all tracked and reported. Of course, you have to instantly spot and terminate non-performers, and identify weaknesses (like a reluctance to upsell). And you have to take preventive actions as well. Think about punch clock functions, for instance, like enforcing lockouts to prevent employees from clocking in before start of shift.

Sales forecasting

Accurate forecasting needs to be detailed, which means going beyond end-of-day numbers. You have to know sales volume by time of day—that way you have the right coverage on the floor all the time instead of most of the time. You have to know sales volume by type of meals—that way you don’t have the wrong chefs in the kitchen. You have to know the sales volume at the bar—that way you don’t leave a bartender with little to do but wash clean glasses.

The art and science of scheduling

Controlling costs isn’t just about how many people you schedule at any given time: it’s also about which people you schedule. Many restaurants take the easy approach: put their A Team on the floor at the same time during peak periods. That’s short-sighted though: the only way for newer staff to learn the ropes is under pressure, with top performers to guide them. The more strategic approach, then, is to have the right mix of skills on the floor—some of your best working alongside newer staff. To some extent the same principle applies during slow periods: now some of your promising staff mentors trainees.

The importance of skill sets

The issue expands though; it’s not just about performance now, but skills as well. Key to labour management is having staff that can handle more than one type of job. When bar sales are slow, schedule servers who can mix drinks or greet and seat.

Skills are not just about what someone knows: it’s also about what someone can learn. Once again analysing labour management data, you can easily spot, for each employee, where existing skills need strengthening or new ones can be developed. If a server is consistently rated high in customer feedback, teach them to handle the podium. A prep chef rated “quick to learn” can be taught to handle the grill. Just as important, you need to know—in fact you need to be alerted—to employees for whom additional training would have little value.

Approaching the magic 20% is done with data, analysis, monitoring, strategic scheduling and more. It’s about knowing the details, and knowing how to use them.