Why your restaurant’s labour cost percentage isn’t what it should be

Megan Lipscombe

Megan Lipscombe

Marketing Lead

What is the perfect labour cost percentage? Sitting at 30-40% of total net sales, labour cost percentage for restauranteurs tends to be much higher than the 10-20% seen by retailers*. Whilst this is something many restauranteurs  have just come to accept, what’s to say we can’t bring this figure down? And without reducing staff numbers.

Although the main thing to get right is the balance between staffing levels and demand, there are a number of other factors that you might be missing which could be affecting your outgoings. We’ve put together 5 reasons why your labour cost percentage may not be as good as it could be and what you can do to change this.

You’re not accounting for seasonality or one-off events

There can be a lot of common trends in day-to-day footfall, with peaks and troughs at certain times of day. Whilst daily trends inform your scheduling to an extent there are a whole host of other factors to consider. Have you thought about seasonality, one-off events or even the weather?

Many of us account for the bigger seasonal events such as Valentine’s Day, Mother’s/Father’s Day and Christmas. But you also need to consider the smaller local events such as football matches, concerts or pop-up events. All of these can drastically affect the number of customers you need to accommodate for, be it pre-booked covers or walk-ins. Make sure you’re prepared for every situation so that you never end up with too many or too few staff.

Inaccurate time & attendance monitoring

Did you know that paying your employees from the minute they clock-in, as opposed to their scheduled start time, could be losing you money every month?

Many restauranteurs often overlook an extra 10 minutes here and there without considering that an early clock-in isn’t necessarily the time your staff begin working. We aren’t saying that your employees aren’t working their hours; just that the time they clock-in will more often than not allow them time to put on their uniform, grab a coffee and have a quick catch up with fellow colleagues before starting work.

By monitoring time and attendance properly and not paying your staff for unapproved overtime, you could significantly reduce labour spend. In fact, we have found that many of our clients have seen savings from this alone that have resulted in an average ROI of 130%.

Uninformed rota scheduling

We touched upon accounting for seasonality and one-off events but what about day-to-day trends and wage spend? It’s one thing to build rotas based on the odd pattern you have spotted whilst running your business, but how about building rotas based on actual figures?

Recording and combining data on past shifts, sales, wage costs, upcoming events, bookings, and weather forecasts, will enable you to build more informed schedules; meaning you always have the right level of staff to meet demand without overspending.  For instance, if you know that you are expecting an influx of customers at lunch time but the breakfast shift is quieter, then why not take some hours from the breakfast shift and add them to the lunch time shift? Your wage cost remains the same but the wage percentage is better for both shifts.

Knowing what works when it comes to rota scheduling for an average day and how this is affected by other factors, means that you can generate templates and reduce admin time spent on building rotas from scratch each week.

You’re not accounting for holiday pay in advance

Has it ever come as a bit of a shock when multiple staff members take holiday in the same month and suddenly your rota wage costs double? With many restauranteurs paying for both cover staff and those on paid leave each month this is often the case; but it isn’t something you need to accept.

If you incorporate holiday pay into hourly wages within your reporting, then even though wages will appear a little higher than they should be each month, you will eliminate the risk of any nasty surprises cropping up unexpectedly as a result of staff taking leave.

Your timesheets aren’t synced with your payroll

How confident are you that what you’re paying your employees is 100% correct? If you’re using paper timesheets and manually calculating and inputting hours into your payroll system, then you’re leaving a lot of room for error. Something that may seem small, such as overlooking a discrepancy of a few minutes in scheduled vs worked hours, or paying someone for a missed shift, can be part of a much larger problem when reviewing figures at the end of the month.

Make sure your timesheets are built using accurate data and integrate with your payroll system in real-time. This way you can be sure you’re paying your employees the right wages.

To conclude…

Essentially, it’s all about greater accuracy, visibility, forward thinking and better communication between your systems. With more informed rota schedules, automated attendance management and better cost control you’re bound to achieve the best possible labour cost percentage.

Interested in how Rotaready can help you achieve this without increasing your workload? Just email us at team@rotaready.com or drop us a message via the live chat.

*based on Rotaready data

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