Calculating The Cost Of Labor

There are a number of obvious components that enter into the cost of operating a restaurant successfully. The space, equipment, food and supplies, marketing costs and one other significant factor, that of labor. If you are the owner or manager of a restaurant, paying employee costs is often one of the largest expenses to continue operation. Here are a few tips that will help you determine how to operate with reduced labor costs.

You must consider all the costs related to labor. This includes management costs as well as those related to waitpersons and dishwashers. Labor costs typically are made up of salary or wages, benefits and taxes, and training costs. There are extra expenses for items like employee recognition.

Looking at each of these elements separately may help you to see some places where savings are possible. However, you may also find that combining the separate elements will actually enable you to pay less. For example, if you pay a little more than the going wage of the area, you may find that your employee turnover rate is lower. If you think about it, the cost of recruiting, training and outfitting new employees can be significant. It may be significantly less costly to retain the existing top quality trained and experienced people by paying a little more.

Employee benefits can be a significant expense, but there are ways to reduce those costs without reducing quality. Health insurance may be another way to attract and retain quality people to work for you. The type of benefits that you provide can vary according to the pool of potential employees that you are drawing from. For example, family medical benefits may be more important if most of your waitpersons are single parents. Tailor your benefit package to match the needs of people in your employee pool.

If your employee pool is mainly from college students, flexibility in hours may be more important than health care. Offering work for students in culinary arts may be another way to reduce costs. On-the-job training opportunities are a great way for getting subsidized or partially subsidized workers who are anxious to offer good service.

It's important to consider your own labor when calculating the cost of staffing your restaurant. It may be tempting to spend your time doing a lot of tasks that could be done by employees, thinking that this will save money. In fact, calculate the actual cost of your time and determine, if you would be more profitably employed by concentrating on management and marketing, rather than filling in for a dishwasher or waitperson.