Understanding the Importance of Labor Costs: 3 Tools to Save Money

Push Operations
December 10, 2020

Those in the restaurant industry are well aware that labor is one of the highest costs in running a restaurant. However, simply cutting hours is not always the solution in cutting costs. It may seem an easy fix to cut hours but there's possible chance of decreasing morale and inciting job security fears.

But there are other proactive ways to combat labor costs whilst allowing your employees to excel, and for you to save time! The answer here? Technology and automation. Though technology doesn't solve all questions, we think these tools below can help save your restaurant money via decrease your overall labor costs, increase profit margin, and decrease employee turnover.

Employee On-boarding and Training Software

Restaurant managers and owners should invest in quality on-boarding and training software to improve employee retention and training processes. When your employees are well-trained with a thorough on-boarding process, which can be executed with help from an  effective human resources information system, productivity is likely to increase and turnover is likely to decrease. Engaged employees are happy employees; and happy employees don't quit! Restaurant owners should make the effort to make the on-boarding and training process to simple for new hires. The transition will in turn help improve work culture and work to keep morale high. All of these things add to an increase of employee retention and decrease in turnover.

Scheduling Software

Scheduling software is another effective tool that can also help with the understanding and managing of labor costs. Schedule software is not simply used to schedule shifts. You can use this software to overtime optimize employee schedule  based on the date of sales and labor forecasts. You can also use scheduling software effectively by considering factors like food costs. Find out how much it actually costs you to make, prepare, and serve your food and then consider how much you are paying your employees. This way you can also evaluate staff productivity by grouping different positions or sections together for review of this productivity. Scheduling software and other similar tools can help to make sure your labor costs are efficient in these areas. Additionally, by monitoring scheduling and profit (essentially your labor costs) on an ongoing basis, you will be able to make appropriate scheduling changes well in advance and prevent unnecessary costs including meal break times or overtime.

Payroll Software

Tools that help with payroll will also assist in maintaining labor costs and keeping them in line with your restaurant’s growth. It is important to evaluate your compensation plans on a regular basis to ensure you are staying competitive, but also keeping costs relative to your industry and competition. Payroll software can help with automating payroll calculations, keeping track of and managing overtime, and tracking meals and breaks in an effective way. Payroll software will help you stay compliant and pay the appropriate, applicable, and accurate premium like overtime and meal period premiums. This kind of tool may also help you to stay up-to-date with minimum wage increases or changes which allows for planning schedules according to increasing or decreasing revenue.  

Understanding labor costs will truly help you run your business more effectively and efficiently. While the human connection factor in all of these processes and tools is important and must not be forgotten, it is a no-brainer to take advantage of these tools. Owners and managers of new (and existing) establishments can work to improve their workflow using these types of tools. Ultimately, it comes down to hiring and keeping quality help, maintaining workflow processes, and keeping up with changes in order to accommodate evolving economies.