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Labor Metrics in Hospitality Settings – A Brief Overview

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In this post, we outline a few labor metrics that are useful in hospitality settings. Your employees are among your restaurant or hotel’s greatest assets. They’re the ones who ultimately keep customers happy and coming back. However, your staff is also one of your largest overhead expenses, and inefficient scheduling will damage your bottom line.

Overstaffing leads to overspending and a loss of profit. Understaffing leads to customer frustrations and a loss of sales. Taking an analytical approach to labor management is a way to help maximize the efficiency of your labor force.

Sales Per Employee Hour

One type of measurement worth noting is sales per employee hour. You might also hear it called sales per man hour, sales per labor hour, or SPLH.

When calculating sales per labor hour, take the number of sales for a given period and divide it by the number of hours your employees were working that period.

For example, if you are determining the sales per employee hour for a two-hour period where 10 employees were at work, divide the total sales by 20.

A higher number means you made more money for the amount of labor hours you scheduled. In other words, your business was more efficient. This number is especially helpful for businesses where the gross profits are directly related to the number of customers served.

Labor Cost Percentage

Another productivity or efficiency metric used by restaurants and retailers is the labor cost percentageWhile the number of customers served affects the profits, the type and cost of items purchased also have an impact.

To calculate labor cost percentage, take the total labor costs over a given time and divide them by the gross sales made during that period. Multiplying the result by 100 gives you the percentage.

A lower number means a more efficient and profitable labor force.

Why Paying Attention to Labor Metrics Matters

In a fast-casual restaurant, the profit margins can be thin. At standard mealtimes, there will be a heavy rush of customers hoping for fast service. In the mid-afternoon or late evening, employees may be less busy, which means fewer employees might be necessary. As you go through a day, your sales per employee hour will rise and fall. As you learn this pattern over time, you’ll be able to address it with smart scheduling.

Of course, good managers can generally predict when their busiest hours will be, from experience, but tracking sales and labor can reveal the big picture as well as less obvious patterns. Over the long term, cutting out inefficiencies can make a big difference.

Finding the Right Number of Staff Members

If you follow the metrics over time, you’ll find that you’re playing a balancing game. Each extra staff member or extra shift means more money spent on labor. However, insufficient staffing will limit or decrease your sales. You’re trying to find the sweet spot that maximizes sales while minimizing labor costs.

Determining the Right Combination of Staff Members

You’ve probably come to recognize that hourly workers are not all created equal. Experience matters in any business situation. Your seasoned team members can prepare food faster or check out customers more efficiently than your recent hires. Scheduling these workers is another piece of the labor puzzle. It might be tempting to schedule all your senior staff members into your busiest periods, and perhaps at times you should. However, this will leave other parts of the day or week without those mentors and reliable workers. You’ll have periods of high efficiency coupled with times of much lower productivity.

Reaching Your Labor Target

Whatever metric you use, TimeForge can help you stay on your labor targets and within your labor budgets. Our platform makes it easy to organize and update your daily and weekly schedules. We’ll help you get the right employees in the right position at the right time. As you work to improve efficiency, our labor management software can produce detailed reports and labor metrics to help you analyze your progress. When you use TimeForge Attendance and Scheduling in tandem, it can even enforce your sales to labor ratio

TimeForge will give you the tools you need to increase the efficiency and profitability of your business. For more information or a free trial of our cloud-based labor management software, contact us today!

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