If you are a restaurateur, then you know how competitive the food industry can get and how a single bad service can compromise sales. However, a restaurant owner who knows where his resources are being utilized can reduce expenses and ensure growth. Since the business cannot operate without aid from a full staff compromising of chefs, bus boys, kitchen staff, managers and waiters, those expenses can add up quickly in the form of rising labor costs.

There are basically two main costs you have to contend with when running a business in the food industry: food/beverages and labor. The latter can be divided into:

  • Cost for salaried staff
  • Cost for taxes
  • Cost for benefits (if offered)

The prime cost will involve both labor and food costs and this should be about 60% of your total sales and revenue. So for instance if your restaurant enjoys revenues of $30,000/week, then your prime cost should be $15,000/week.

This is how these figures should be allocated:Calculating Labor Costs for a Restaurant Staff

For Hourly Employees

You may be paying your waiters and other employees who depend on tips based on the hours they work and which might be below the minimum wage limit. In order to calculate what you owe them at month’s end, add up the total hours they worked and then multiply it by the hourly wage. If you pay some servers different wages based on the hours they work, then use that amount to calculate the wage they will get.

Similarly, take the hours that your bussers, waiters, cooks etc who work for minimum wage and multiply it by the hourly rate. Then add the cost of all of your employees of one week and divide it by the weekly sales. This will give you the sales percentage that makes up the hourly labor costs of your restaurant.

For Salaried Employees

To determine the labor costs for your salaried or full time employees, (such as your head chef or manager), divide the annual sales amount by 52. Then, add the weekly cost of labor of the employees and divide the figure you get by the weekly sales figure. In order to calculate the percentage of sales that your full time employees cost, just add the labor costs of weekly employees with salaried ones and divide the figure by the weekly sales amount.

Reducing costs

If your labor costs are higher than your weekly sales, reducing costs in labor will help you balance out. For instance, by asking staff to clock in no earlier than 15 minutes before their shift, you can reduce the monthly wages you pay hourly employees.

In order to keep labor costs low and increase productivity at the same time, install a biometric time clock such as Zip Clock to keep track of the hours each employee works. The cloud based and simple to use software takes minutes to implement and can be accessed from the web from any device.