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How to Cut Labor Costs for Your Restaurant

how to cut labor costs for your restaurant
Ian Heinig

By Ian Heinig

Labor is the single largest expense for restaurants, representing 30-35% of gross sales on average, according to Bizfluent.

Reducing the cost of labor is key but also a challenge for operators. Labor costs are not fixed but fluctuate seasonally and by customer volume.

Being attentive and responsive to labor costs helps you to preserve your profit margins, whether by reducing payroll, turnover, or overtime. The money you save can then be reinvested to improve the customer experience and drive sales.

89% of restaurants say that data on labor expenditure offer the highest opportunity for savings. Knowing your labor output is the first step to cutting your costs, which translates to happier employees and customers.

Here are four ways to cut labor costs at your restaurant.

Reduce Employee Turnover by Monitoring Labor Reports

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Employee turnover is a frequent and expensive occurrence for restaurant owners.

Consider that the average turnover rate for restaurant employees is 73%, according to The Bureau of Labor Statistics; that means that 7 in 10 employees you hire won't make it through the year.

Add to this that the estimated average cost of replacing a churned employee is $5,864, according to the Cornell Center for Hospitality Research. These figures represent a massive cost to restaurants, so aim to retain employees rather than hire and re-hire.

To reduce turnover, identify the top-performing employees and the underperformers, as well as your turnover rate. You can do this by manually by referring to your POS software, or more easily by generating a labor report for your restaurant.

As seen above, labor reporting software gives you an immediate and comprehensive understanding of your labor data.

From here, you can provide training to struggling staff, solicit feedback, and optimize schedules to retain your best employees.

Combatting turnover is best done by providing individuals what they need to succeed, and by fostering a meaningful workplace culture. Recruitment, training, and management style all combine to keep your staff happy and keep them from leaving.

Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.

Limit Overtime and Pay Overages Through Use of Time Clock Software

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Businesses and employees both know that over-time adds up.

Labor costs and the minimum wage are forecasted to increase, so operators must find ways to avoid overpaying for labor to stay profitable.

Hiring seasonal or part-time staff allows you to meet your scheduling needs, especially during busy times but avoid paying overtime for hourly and salaried workers.

Time clock software helps companies to recognize when employees and managers are nearing the overtime benchmark. This way, managers can structure schedules that avoid overtime payments without adding to their workload.

As seen above, scheduling software allows managers to quickly assess hours for overtime, total pay, and employee status.

Time clock software also helps to eliminate time theft.

Buddy-punching, early starts, and long breaks are just a few ways that restaurants end up paying staff more than scheduled. Employee time clock solutions allow you to set alerts and remind employees when it's time to go off shift.

Versatile and improved scheduling tactics, as well as employee visibility, help managers to reduce overtime and save money.

Train Staff for Efficiency While Ensuring Quality

Training staff to be more efficient reduces the time and money required to run your restaurant. A well-trained staff helps you to save money without sacrificing the quality of service.

Here are some techniques to create a more efficient team-

  • Outline steps of service in a detailed employee handbook. Incorporate these steps into an employee training plan, making this a must-do for staff that wants to get the best shifts.

  • Provide checklists to accelerate task-completion, encourage good habits, and self-sufficiency. Whether for regular or irregular tasks, this helps staff to learn the processes and reduce error on their own.

  • Hold staff meetings. Take time to review policy changes, new menu items, and educate staff. Doing so leads to fewer mistakes, improved teamwork, and demonstrates to employees that you care about their development.

Optimize Your Scheduling With Employee Scheduling Software

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Traditional scheduling methods generally consist of a time-intensive process that contains inherent inefficiencies. Optimizing your scheduling allows you to streamline the workflow to better accommodate the needs of both staff and customers.

Say, for example, you're a manager that creates the employee work schedule in Excel and inputs schedule requests by hand. While this is a typical process used by many, it's draining to tweak the schedule and upsets staff who didn't get the hours they want.

Meanwhile, this technique requires you to rely on unintegrated data from previous years to set the schedule, which often results in overstaffing or understaffing both of which incur serious costs.

Employee scheduling software makes it easy to publish and adjust schedules, helping to keep staff happy and your restaurant ready for every situation. These solutions integrate schedule requests instantly, automate scheduling, and present you with relevant data to ensure you're creating a schedule that's optimized for demand.

Employee scheduling software solutions are also available to employees as a mobile app, helping to engage and retain employees while conserving your budget.

Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.

Tips on How to Lower Your Restaurant's Labor Costs

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Labor is a significant expense that can be reduced by using technology and best practices.

Aim to retain your staff, as it's more costly to recruit employees than to pay them well and retain them. On the other hand, you can hire seasonal workers to fill the gaps and meet demand when appropriate.

Lastly, digitize your scheduling to increase efficiency, cut costs, and leverage your data in meaningful ways.

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