Controlling Your Hospitality Labour Costs
LEARN HOW TO CUT COSTS WHILE IMPROVING SERVICE AT YOUR RESTAURANT, BAR OR PUB
1. The Schedule
Okay, let’s get started. Always remember – control your labour costs through better scheduling, not lower wages.
New week, new schedule
Every week is different and your schedule should reflect this. Don’t just recycle last weeks schedule. Ensure you have checked the availability of your staff for the coming week.
Check last week’s schedule to see where you may have been overstaffed and look ahead to any large events that may be planned. If your staff outnumber customers during certain shifts, chances are you’re wasting money, so re-evaluate your schedules constantly.
Make decisions based on data and experience, so you can avoid struggling to cover shifts at the last minute, or dealing with overstaffed shifts.
Cost & build
Costing as you build allows you to really see where you can save. If you wait until the end then it becomes a mad dash to cut hours and stay on budget, which always leads to inefficient schedules.
Set clear targets
Without clear targets, there is no way to ensure a steady labour cost. Work out what your current target labour cost is based on this week’s schedule and see if you can reduce it by 5% for next week.
Set attainable and measurable goals, rather than simply hoping for the best. The more data you capture, the more capable you are of making solid decisions around costs.
Over 10% of a manager’s time can be spent managing the schedule.
Target sales per labour hour (SPLH) is a great key performance indicator (KPI) to track for your hospitality business. If you have target sales of £2000 and target hours of 40, then your SPLH is £50.
Try and maintain a steady SPLH throughout the week and don’t let it fluctuate with sales patterns. This will also ensure you have adequate staff cover for each day.
Do all your staff arrive at the same time for each scheduled shift? Do you need all your staff to be in at the same time?
Most shifts require a bit of prep work, which usually only takes one or two people. If you adjust your shifts to start in 15 or 30 minute increments then your staff will arrive as you need them.
Designate shifts based on performance and strengths
Once you’ve been reporting and analysing your costs and productivity for a while, you’ll naturally notice individual employee strengths and weaknesses.
One member of staff may be better equipped to deal with the busiest nights of the week, whereas another may be a whiz at enticing customers to order food.
By recognising these strengths and using them to your advantage, you can optimise your labour costs (as well as make your employees feel valued).
Are labour patterns reflecting sales?
When your sales increase, your labour cost may increase. But when sales decrease, do your labour costs decrease?
In order to achieve a reduction in costs, you have to schedule accordingly and anticipate periods of low sales as well as high sales.
This is where software like Bizimply’s is invaluable, as it allows you to capture and view sales data, so you can anticipate lull periods, and adjust staff rostering.
Low service levels and too many staff?
Remember sometimes service levels can be affected by having too many staff. Too many staff can often be worse than too few staff.
Remember the old saying “the devil makes work for idle hands”. Idle staff are poor for the businesses image too, as customers will note the natural lack of enthusiasm and energy.
In addition, a surplus of staff can result in unhappy employees, who have to split their tips with a larger number of co-workers.
End of week comparisons
Before launching head first into another busy week, it is important to reflect on what happened in the previous week. Try comparing scheduled labour costs against actual labour costs at the end of every week. You will quickly see if changes are needed.
2. Time And Attendance
Most labour savings can be made at the start and end of each shift.
Have you got any buddy punchers?
Buddy punching is when an employee has a co-worker punch them in early or punch them out after they leave. It is a common practice that is extremely hard to detect. A common deterrent for buddy punching is a clock in machine with a fingerprint scanner.
These, however, are notoriously slow, easily broken in a fast- paced environment and can actually result in employees being late for work. Many of our customers experienced this and made considerable labour cost savings when they replaced them with our iPad clock in app called Timestation.
This allows a quick picture to be snapped each time someone clocks in or out, a simple and effective solution. Obviously, there are other great apps out there so find one that suits your business, but know that eliminating buddy punching can dramatically reduce labour costs.
Over 400,000 people are employed in pubs and bars in the UK.
Are you comparing actual against scheduled times at the end of every shift/day?
Is there a pattern emerging with staff leaving later on certain days regardless of how busy you are? It is important to emphasise to your managers that they need to stick to the schedule and ensure their teams finish on time.
Try to ensure that staff only sign in when in uniform and sign out before changing.
Set clear times for actual breaks
Your staff should know when their break is and how long they are entitled to take. Allowing your staff to take breaks during lull periods leads to longer breaks as there is no pressure to get back to work.
Also for staff who smoke, this should only be done on their actual break. Do not offer smoke breaks to staff.
3. Shift Management
Before, during and after service there are some practical things to do.
Pre & post service team briefing
A quick meeting before and after every shift gives you an opportunity to teach and listen. You can also take the opportunity to share targets with your employees at these shift meetings. Meetings like this encourage an environment of professionalism.
If staff are clear on what is expected of them and how their role ties into the overall success of the restaurant, bar or pub, they are more likely to work hard. This results in a number of positive outcomes, namely happy customers and increased and repeat- business.
All hands on deck
Are all hands on deck at your busiest times? There should never be anyone taking their break or working in the back- office in the middle of service.
Ask yourself, are all your staff fully utilised – at all times? If not what prep work could people be doing? Are there systems in place that could be replaced or improved? Just because something is working, doesn’t mean something else wouldn’t work even better.
The night-time industry (pubs, clubs and bars) in the UK employs 8% of the entire workforce.
Don’t just assume that your staff don’t have the time to do the job. Sometimes it’s just a case of working smarter. Often, the time it takes to do job properly directly relates to the time available.
Think about every task your members of staff are doing – are there more effective ways of doing these? Could a task being carried out by two members just as easily be completed by one?
How many employees does it take to change a light-bulb?
Watch for telltale signs of too many staff – such as two people cleaning a fridge.
Write a clear job description for each employee.
A job description is a detailed definition of a job and a list of the specific tasks and duties the employee is responsible for daily, weekly and monthly. The more complete the job description, the simpler the task of training.
Remember, staff with a confirmed list of duties will be less inclined to “fill time”. Sample job descriptions may be available from your HR department. You could also get started with a quick Google search. Busy employees are typically happy employees – they’re more likely to generate tips.
Many businesses still underestimate the magnitude of the problem of employee absenteeism, displaying an attitude of “it’s just something that just comes with the territory”.
However, underestimating the value of solutions that can reduce the costs and lost time that results from employee absenteeism bring can cost. Hospitality businesses should ensure that there is an absenteeism policy and take proactive steps when employees are absent.
Luckily, attendance and scheduling software, like Bizimply’s, can track not only when employees clock in but also when they should have clocked in. Built-in analytics allow managers to identify frequent offenders and measure the costs of absenteeism.
This cost is both direct (employee paid time off, accounting for wages/salaries, overtime costs and replacement worker costs) and indirect (delayed work, co-workers and supervisors affected, lost productivity and the need for replacement staff).
You’re no angel…
As a manager, you must examine your own work practices. Do you come to work grouchy? Do you have poor work habits? Is your appearance unprofessional?
You will set the standard as to how others behave, so it’s essential that you practice what you preach. Be the change you want to the see, as well as an example of the kind of talent you wish to attract. If you want your team to have positive traits like integrity and honesty, you must first display these traits.
Similarly, make sure you demonstrate respect to your workers. Mutual respect plays an enormous role in good leadership. Share your goals with your employees, remember lead by example.
Simple changes can increase productivity and reduce waste.
When you incorporate ergonomic guidelines to maximise worker efficiency, you give the restaurant or bar a chance to succeed in maximising profitability.
With ergonomic design standards implemented into your bar layout, your bartenders will have far less strain and fatigue, leading you to increased profits.
Bartenders and staff not having to bend over to get things like glasses will play a huge part in their well-being and overall work satisfaction.
A good bar with an intelligently built bartender station can equal huge sales. Not only can staff work more comfortably, but they can work faster.
Increase productivity by having 3 types of storage. Active, back-up and long term.
Active storage is accessed repeatedly throughout the day and should be near the work station.
Back-up is used to refill bulk items and long term should be out of reach and locked away.
One-half of all adults have worked in the restaurant industry.
A place for everything and everything in its place – staff will not have to waste time looking for anything.
For floor staff, reduced clutter and easy access to the kitchen or bar allows them to service customers quickly and efficiently. Having a ‘home’ for everything will save you time as well as costs.
Can you rearrange work areas. The fewer steps that people have to take, the faster they can do the job. Create mini work stations where all necessary food, utensils and prep spaces are close at hand.
In the UK, most pubs are still owned by a pub company or a major brewery.
Break the kitchen activities into self-contained workstations where ingredients, tools, equipment and supplies are within easy reach. This will eliminate excessive bending, lifting and reaching.
It’s also important to remember your left-handed employees when setting up workstations.
Check that there are no equipment problems that are affecting labour. Ensure knives are sharp, and train your staff how to use them.
Things like over-pouring and breaking glasses due to carelessness are things that cost a business a large amount over time. Make sure staff are diligent with their handling of these things.
5. The Menu
Where can we save time with the menu?
Do we need to change the menu? Is it too labour intensive? Are there too many offerings? Always ask, are you selling enough of a specific item to warrant the labour required to prep, prepare and serve it.
Explore labour saving ideas of self-service restaurants – buffets, tea/coffee machines etc. Could you make this work for your business, perhaps with a unique twist?
75% of your food sales will be generated by 25% of your menu. Keep it simple.
Are the dishes causing problems?
Always check how many dishes are returned after each service. Know the reasons why each was returned and how much it cost to comp or replace meals.
More often than not it is the same one or two dishes that are causing problems for your customers and obviously your cook. While the problem may lie with the cook, you may also reduce wasted labour and food costs by making some small changes to the dishes or removing them from the menu entirely.
Better prep work
Can you do more prep in advance and perhaps batch cook some dishes? This will allow the chef to serve and observe portion control etc.
You may look at sous-vide cooking as a labour saving option for your food prep.
6. Staff Training
You won’t do it better if you don’t know how to do it right.
It’s quicker when you know what you’re doing
Do you invest in training? Ensure that the staff are trained in the jobs they are doing. Allocate time to properly train your employees.
Do you regularly review your current employee training needs? This has the added-on effect of increasing the likelihood of employee retention.
Who’s the trainer?
Maybe you could appoint a trainer in your unit. Untrained employees will cost you more in low productivity, poor service, waste and inefficiency.
A flexible workforce
Cross training staff and multi-skilling. Teach your employees how to do jobs other than their own regular jobs.
Employees can be moved around and fill in while other staff are absent. Supervisors could serve or do cash. Chefs could man the bar if required.
A smarter workforce
Lack of training can lead to employees having poor attitudes twoard various aspects of the business and will most definitely lead to many staff developing poor work habits.
Proper training will lead to greater employee productivity. It’s your job to teach them how to work smarter, not harder.
7. Staff Hiring
Hire once, hire correctly, retain.
Look for more
Remember your business success is based on your success at gathering together a group of workers with different skills and experiences to produce a quality product.
Search for the right person to fill the job. Look beyond the basic skills for a person who will be the face of the restaurant and will work well with your team.
Hire on tasks, not on talk
Before you hire an employee – be mindful of the tasks the employee must accomplish. Is this person suited to talking to important customers all day or doing a lot of back office tasks?
Remember the cost of employing a worker is far greater than his or her gross pay, regardless of the worker being salaried or hourly.
It is never the right time to hire the wrong person
Resist the temptation to “panic hire.” Don’t in desperation, hire the first person you interview. Hold out for the right person.
Pubs, bars, restaurants and clubs employ around 1.3m people in the UK.
Strike a balance between quality & cost
In general when hiring, the more you offer, the higher the standard of applicants. That said, if your pay rates are in line with industry practices, you shouldn’t need to spend too much.
Focus on keeping labour costs down when hiring new talent, but without compromising quality. Create a balance between payroll costs and hiring staff that are happy and will stay.
Your current team has great potential!
Try to promote from within your own business. Develop a succession plan for your business if you have not done so already. Promoting from within will motivate staff to do a stellar job, which will result in more sales and happier repeat- customers.
What % of your budget comes from agency workers?
What % of your budget comes from overtime?
What is your labour/sales ratio for every day or hour?
If you do need to hire, instead of looking to employment agencies, ask your employees first if they can recommend anyone.
8. Reduce Staff Turnover
Pubs spend over 1/4 of revenue on staff payroll costs. It pays to put practices in place that encourage employee retention.
High staff turnover costs more than money!
High turnover of staff is very costly to the business. Re-staffing and training costs your business in productivity but also has a huge impact on customer relations.
Any relationships fostered between your staff and your customers will be hard to recover, should that team member leave. Other costs include lost uniforms and obviously, the time spent hiring in the first place.
Know why they leave so you can improve
Remember exit interviews are valuable information gathering opportunities.
Make sure that you get a chance to spend a few minutes with any staff member leaving before they move on. This will be your only opportunity to hear their honest opinion of their time with you and your team.
Don’t throw money at the problem
While offering greater benefits and pay rises will undoubtedly attract more potential employees and help to retain existing employees, this will not solve the underlying reasons for a high staff-turnover.
On a daily basis, there are simple things you can do to ensure the workplace is a supportive and enjoyable environment. Hardworking team members should be praised for their work in front of their peers. This helps to show others that you respond well to a job well done.
After busy weeks or great team efforts, small gestures like gift-cards or movie passes can be great to let your team know their efforts are not going unnoticed.
Treat staff well
If you treat your employees fairly, not only are they more likely to work hard, but they also typically become brand ambassadors of your establishment, promoting the restaurant, pub or bar to friends, family, and online. They’re also more likely to recommend others to apply for positions.
Things you can do to keep your employees happy:
1. Promote from within.
2. Have a training program in place.
3. Include personalised inductions as part of their on-boarding.
4. Create fair schedules that employees are agreeable to.
9. Reduce Staff Theft
Staff theft comes in many different forms and can be a huge detriment to labour costs. Prevent theft and control costs.
Outright theft is where bartenders pocket the cash instead of ringing up a customer’s drinks. Giving away drinks is not an uncommon practice either.
In this case, the motivation is usually to generate more tips. Taking alcohol for themselves or others is another form of theft, which can have huge costs.
Time theft results in higher labour costs and lower productivity. This can happen through deliberate fraud, like buddy punching, as well as laziness, overextended breaks, excessive personal time, and tardiness or leaving early.
Time and attendance software like Bizimply’s can help prevent time theft by keeping track of exactly who is working and when, as well as the resulting sales over that shift. In addition, actual hours worked, as opposed to scheduled hours, can be sent to payroll for processing.