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Are You Doing All You Can to Control Your Labor Cost?

Over the past two to three years, hourly wage rates have risen sharply in most markets. In addition, restauranteurs have also seen significant price inflation in many other key operational areas impacting the cost of food, beverages, supplies, and other operating expenses.

While menu price increases have offset some portion of these added costs, profit margins in most restaurants have compressed and continue to be under pressure. This has resulted in many operators taking additional steps to better control their labor cost.

The following is a short checklist of effective labor cost control strategies and practices that can help make the most of your staff’s time, reduce scheduling inefficiencies, and improve the overall productivity of your staff.

Pay for performance, not tenure. Tie pay raises to superior performance, productivity, dependability, and teamwork. A-Player level employees can often accomplish as much as multiple B- or C-level staff members. Pay your good people more and they’ll be happier and stick around longer.

Verify clock-in and clock-out times. Each manager, at the end of his or her shift, must check that all employees are clocked in and out correctly. When someone doesn’t clock in or out correctly, overtime is more likely to occur. Furthermore, a manager may notice patterns of employees clocking in too early or too late and can correct the problem.

Schedule shorter shifts. There are days when sales unexpectedly jump through the roof and it makes sense to keep one or two people to help out during the extended rush. If shifts are scheduled for six or six and a half hours, asking someone to stay later won’t necessarily mean paying unnecessary overtime. Shorter shifts allow employees to be more productive for the entirety of their shifts. Typically, the more hours they work, the less productive they become.

Mix higher-paid and entry-level Team Members. Ideally, each restaurant should have a mix of higher-paid employees and those that are paid at entry-level wages. This will provide a more manageable wage rate for the restaurant and will make it easier to manager and control labor costs.

Schedule your best team members at peak periods. When making assignments on the schedule, assign your best-trained, most efficient employees to work during peak periods. They are typically more productive than newer, less seasoned employees, and will also usually generate more sales dollars.

Minimize overtime. Scheduling employees to work overtime or continually allowing employees to work overtime is an inefficient method of staffing a restaurant. It is a sign of poor management, and labor costs rise without any comparable improvement in productivity. While this may be good for the employee pocketbook, it doesn’t make a lot of business sense to pay a premium wage when, in most cases, it can be avoided.

Set time limits for side work. If a manager understands how long work duties take to complete, he or she can better manage and set appropriate, realistic time limits for employees. Getting people off the clock quickly and efficiently is one of the quickest ways to reduce labor costs and has no negative ramifications on service to the guests.