In the previous articles, we have had a look at tangible and measurable variables that contribute to operating costs. We discussed how inventory control, portion control, budgeting and other sound business management practices work together to keep food costs down to a reasonable percentage of gross sales. We have also had a brief look at labor costs and their contribution to overhead expenses. Now it’s time to take a closer look at the financial side of labor management and how effective scheduling can keep payroll costs under control without negatively affecting the customer’s experience.
One of the most important tasks that any manager faces is staff scheduling. Oddly enough, as important as this task is, few managers receive any formal training in personnel scheduling. It’s something they are simply expected to know how to do. Unfortunately, many restaurant managers do not understand how to effectively schedule staff, and this costs the restaurant money and contributes to the amount of frustration among the managers and employees.
Scheduling Is Not Usually Simple
Scheduling is much more than simply anticipating customer volume and then ensuring that there are an adequate number of employees present to handle peak busy periods. Because payroll is one of the largest controllable expenses, it is important to understand the underlying financial metrics involved in controlling payroll costs while still maintaining optimum staffing levels.
One of basic metrics is the “payroll to total sales ratio” which encompasses all fixed and variable payroll expenses including management salary. Mangers who strive for more accurate measurements often include non-payroll costs such as entertainment fees paid to live performers.
How to Calculate the Payroll-to-Total-Sales Ratio and Other Ratios
- Total all payroll costs for each shift.
- Divide the total by each shift’s gross sales.
- Multiply the result by 100 to convert the number into a percentage
Payroll-to-Total-Sales Ratio = ((Payroll/Sales) x 100)
There are other metrics available that some believe provide an even more accurate measurement of payroll costs. Here are three of the most popular:
The number of covers per labor hour (Total Labor Hours/Customer Count)
The total cost of labor per cover (Total Payroll Costs/Customer Count)
The total cost of labor per labor hour (Total Payroll Costs/Total Labor Hours)
All of these metrics provide a way to measure labor costs, but they don’t provide a solution for controlling labor costs. When used in conjunction with one another, and considering your restaurant’s particular situation, these measurements and ratios can be helpful in pointing out problem areas within your business. These measurements alone should not be used as a launching point for major structural changes.
Fixed Labor Costs and Staffing
There is a certain fixed labor cost that a restaurant can not drop below without affecting service quality levels. These costs include the minimum staffing levels required to open the restaurant each day and do the prep work. Optimal staffing procedures call for gradually increasing scheduled wait and kitchen staff as the restaurant moves towards its daily peak traffic times and cutting staff as the volume wanes.
A schedule that looks good on paper may not actually work as the week progresses. Scheduling is constantly a work in progress that is governed by these guidelines:
- Train shift managers to ensure that everyone is working to their full capacity.
- Do not overstaff on shift managers.
- Monitor kitchen, wait and support staff and adjust for peak and off-periods as necessary.
- Senior management or owners should review schedules created by subordinates on a regular basis.
- Establish and review cut policies to avoid over-staffing during slow periods.
- Ensure that shift managers closely monitor staff to ensure that side-work and opening/closing duties are being performed efficiently and as quickly as possible.
- Calculate payroll costs at the end of every pay period.
- Monitor payroll percentages to be sure that they are in line with sales.
- Adjust schedules during the week to reflect business realities.
It takes good scheduling skills and close monitoring to keep payroll costs under control but the end result will be a noticeable increase in profits.
How long does it take to make an employee schedule? It should take less than 5 minutes! Did you know that labor costs could be as much as 30% of your expenses? TimeForge can help streamline and minimize labor costs through effective employee scheduling at your restaurant, bar, or club.