Balancing Restaurant Labor Cost with Employee Satisfaction

Restaurant labor cost is increasing at an unprecedented rate. According to the National Restaurant Association, hourly wages for restaurant employees grew by 12.1% between February 2021 and February 2022.

Driven by the hiring crisis, many restaurant groups are trying to woo employees with higher wages and benefits for hourly employees – both mostly unheard of prior to the pandemic.

But in an employees’ market, restaurants are also carefully weighing higher labor costs against the bottom line. With the high cost of employee turnover, operators are walking a tight rope between optimizing labor costs and satisfying employees’ needs.

The burgeoning distribution, delivery and ridesharing markets give today’s restaurant employees new job opportunities. Restaurant jobs are no longer the only choice for students and other workers with scheduling issues that don’t allow for 9 to 5 jobs.

This creates an even greater challenge for employee hiring and retention because restaurants are no longer simply competing with other restaurants for staff. Hence, the higher labor costs.

But controlling labor costs and keeping employees happy doesn’t have to be an either/or proposition. Here are some tips to optimize your labor costs, while also driving employee retention and satisfaction.

Provide work/life balance to control restaurant labor cost

Providing employees with flexible scheduling to allow for educational, family, or personal commitments can help promote a healthy work/life balance. Similarly, avoid scheduling split shifts or unpredictable scheduling that can keep employees from achieving a work/life balance. These simple scheduling strategies can improve morale and promote employee retention.

Mix full-time & part-time employees

Use a ratio of one-third part-time employees to two-thirds full-time employees to reduce labor costs and overtime hours. You simply cannot provide full-time employment for every employee. Using the right mix of full- and part-time employees ensures the right balance of highly reliable with more affordable employees who can perform tasks that don’t require as much expertise and commitment. 

You need to rely on the availability of part-time workers to maintain optimal staffing levels for peak periods and reduce staff levels as demand decreases, while delivering the same level of service. You can also use part-timers to pick up the slack when full-time workers are approaching overtime.

Advanced scheduling software can alert managers when employees’ schedules place them in overtime and can prohibit employees from clocking in or out outside of a specified window around their scheduled shifts. So, beyond maintaining a third of your staff as part timers, keep close tabs on your labor hours and set different functional areas of the restaurant separately with individual labor goals to optimize your labor spend.

A few extra employees per shift may not seem like a major cost, but added up over the month, can significantly affect your bottom line. Also consider that too many servers on the floor means everyone takes home less tip money-–which deflates morale and cuts into your employees’ pay.

Comprehensive Approach to Employee Retention

Improve employee training

Underperforming employees cost time and money. Improve employee efficiency through training so you can schedule a leaner staff without sacrificing the customer experience. This too can help employee morale as performing at an optimal level can build self-esteem.

Cross-train your staff

Similarly, by training new FOH employees in all FOH roles and all new BOH employees in all BOH roles when they first join the company helps them develop an understanding of how the restaurant functions. This can increase efficiency and ease scheduling issues if you experience shortages for a specific role and more work for everyone else.

Improve labor efficiency

Use labor productivity metrics to evaluate your employees’ performance.  With metrics such as sales per labor hour (SLPH), labor cost by staff role, sales per server hour, labor productivity analysis by week, and more, you can identify areas in which your team and individuals need improvement. Know your priorities and provide staff with productivity goals that help the team consistently deliver outstanding service.

Automate scheduling to optimize restaurant labor cost

Restaurant employee scheduling software, especially if it also offers an employee mobile app that’s free to employees, make schedules easily accessible for all stakeholders.  Managers post schedules online and employees can switch shifts with co-workers from their phones with final approval by managers. This helps to prevent last-minute staff shortages and no shows while helping to maintain a culture of work/life balance.

Schedule the right number of employees to lower restaurant labor cost

Scheduling the right number of employees for every shift is a challenging target to hit, but by using data restaurant managers can make smarter decisions about scheduling. Leverage scheduling software and sales data to create more informed future schedules can help prevent over or under scheduling.

With scheduling software, integrated with sales data provided by your point of sale (POS) system, you can calculate your optimum sales and number of customers served per labor hour.  When creating forecasts, analyze past labor costs by daily and hourly trends, not just weekly trends. Effective scheduling is dependent upon analyzing your labor data and scheduling accordingly. With restaurant technology forecasting busy and slow nights, you can then schedule staff while keeping your SPLH percentage goals in mind.

Both under and over staffing have negative impacts on your staff, so scheduling based on data helps to keep happy employees.

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Understand your employees’ scheduling needs and desires

No two employees are alike. Take two servers. One is a single mother, and the other is a college student living at home. You need to send one of them home on a slow Friday night. You know by building relationships with your employees that the single mother needs all the night shifts she can get because that’s when her baby sleeps and she’s already arranged childcare for the entire night. Meanwhile, the college student’s buddies are waiting for him to get off work so they can hang out. He’d welcome getting off a couple hours earlier. There’s no question about which employee to send home in this case. If the job does not meet the single mother’s financial needs, she’s going to seek employment elsewhere. Listen to your employees. Know their motivations. This will help promote employee satisfaction and retention.

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Conclusion

Achieving ideal labor costs is a long-term balancing act that focuses on both staff desires and your restaurant group’s needs. By hiring the right staff, giving the training they need to succeed, and creating data-driven schedules that considers both staff needs and restaurant needs, you can achieve your labor cost goals.

Restaurant365 is an all-in-on restaurant management suite that incorporates a number of labor-related tools, including labor reporting, hiring and onboarding,  payroll +HR, and scheduling, as well as restaurant-specific accounting and inventory management within one cloud-based platform.

Ready to learn how Restaurant365 can help you streamline your back office and discover profits?

Schedule a demo today.