Restaurant Employee Labor: 3 Ways to Save on Labor Costs

Push Operations
December 10, 2020

With the recent increases in labor in BC, Ontario and Alberta in the last year, labor cost is only going up. And as one of the biggest expenses in running a restaurant, our team put together 3 tips on how to save on restaurant labor costs!

Track labor day-to-day

Tracking labor day-to-day will help you with 2 key things. One being, how to understand your restaurant's labor behaviors and its importance and secondly, allowing you to be proactive rather than reactive in terms of recovering costs.

When you have easy access to your labor costs, you’re able to review quickly, ask questions like where you should be focusing on, and whose in charge of your schedule creation. From an owners’ standpoint, how your managers schedule and their method behind it, is crucial in the success of your operations. Tracking labor will also allow you to keep an eye on costs like overtime, and re-evaluate its behavior (like who keeps working overtime, who allows it, and why does it keep happening).

Schedule based on sales

Sales = profit, and labor = cost. If you aren’t scheduling based on your sales, you’re losing money daily. Forecasting labor using your sales is a huge tool in optimizing your scheduled labor. Blindly scheduling employees can eat up your profit margin - especially if employees are constantly working OT shifts, or doubles.

To put it in perspective, let’s say your sales last Tuesday and this Tuesday’s sales forecast is $8000. To turn a profit, your restaurant labor cost needs to stay below 18% of your forecasted sales ($1440). Figuratively speaking, you need 6 cooks, 4 servers and 4 hosts, and all your employees are paid $15 an hour.

If you schedule all employees for 8 hours shifts =

(8 hours x $15) x 14 employees = $1680

$1680 / $8000 = 21% of your sales

Based on this calculation, you know that your restaurant labor percentage is over 3%. This, will allow you to adjust the rest of your week to cover your costs.

Know your employees

Employee turnover in the restaurant industry is one of the highest amongst the working industry; and training and hiring employees can get expensive. Getting to know your employees will aid in your retention rate.

You’re taking the time and money to train an employee - if they decide that they’re unhappy with their workplace, they’re taking the skills that you’ve trained them in and leaving! If you build a good relationship with your employees, not only will you be able to trust them to do their job but they’ll also make the effort to work their hardest. Those who are invested in their job are more prone to go above and beyond their role. After all, good employees are happy employees; and happy employees don’t quit!