5 ways to reduce labour cost in a bar or restaurant.

July, 18 2017

Get Regular Hospo Best Practice Advice

Practical content from leading hospitality operators delivered to your inbox
reduce your wage cost
Chris Baxter
Written By
Chris Baxter

Labour is the second largest expense for a hospitality business, second only to your direct cost of goods. The goal of effective labour management is to have the right number of team members working to give customers a great experience at any given time, but not to have too many people working when customer numbers don't justify it.

1. Set daily sales budgets.

If you utilise the daily sales budgeting module in Loaded, you can set a budget for each day of the year. The more accurately you set this budget, the more useful it will be when completing your weekly rosters, as your calculated staffing percentage should be a realistic outcome for your upcoming week.

Hint: Use the analyse and visualise tabs at the bottom of your roster editor to get more in depth information about where you might be rostering too many staff members.


2. Implement a variable wage rate.

Paying a target based commission to staff members can be a great way to motivate them to help achieve better sales performance in your business, as well as helping to reduce labour costs if you have an unexpectedly poor sales week. The concept is that your base pay rates would be slightly lower than what you currently pay, but you pay commission to your team if they hit your weekly sales target.

Hint: The simplest commission payment is for team members to share a %age of your total sales based on the number of hours a team member worked during the week.


3. Don't under staff during your busiest periods.

It sounds slightly unusual that increasing the number of team members you have working during your busiest periods will help reduce your wage cost as a %age of sales but this is achievable so long as each team member is productive from a sales perspective.

How? Let's say your average weekly wage cost is 25%, if you roster an extra team member on the bar on a Saturday night and they have sales of $500 per hour and a cost of $16 per hour, then that persons direct cost is 3.2% of the sales they are generating, therefore overall lowering your average wage %age.


4. Opening and closing.

Complete an opening and closing of your site yourself so that you know exactly how long it should take to open your premises and to clean and close at the end of the day. When you or your manager create your rosters, you then need to only allow this as the time available for opening and closing.

Humans have an amazing ability to spread the work that needs to be done across the time they have available, so keep the time available to something realistic and consistent . Visit our friends at joltup.com for the best hospitality checklist software around.

5. Incentivise your managers.

Your managers should be incentivised to bring in labour cost either under the rostered dollar cost if sales are below what you had budgeted or under the rostered wage %age if your sales have exceeded what you had budgeted.

Hint: Start small with your incentives offering a bar tab or a meal at your outlet while you implement the systems and processes for monitoring your calculated labour costs versus your actual labour costs.

Pick and choose from the list above to start saving your business money now. We've worked with 1000's of hospitality businesses and a fully implemented labour management system is saving people on average 2%-4% on their cost of sales, that's anywhere from $40,000 - $80,000 for a business with $2 million annual revenue.

View all posts

Get Regular Hospo Best Practice Advice

Practical content from leading hospitality operators delivered to your inbox