labor costs & controls
DESCRIPTION
LABOR COSTS & CONTROLS. FIXED vs VARIABLE LABOR COSTS HIGH TURNOVER, CAUSES & DETERENTS SAVING ON LABOR FORECASTING LABOR COSTS COMPENSATION TECHNIQUES LABOR STANDARDS: QUALITY, QUANTITY, COST JOB ANALYSIS vs. JOB DESCRIPTION CORRECTIVE POLICIES. - PowerPoint PPT PresentationTRANSCRIPT
LABOR COSTS & CONTROLS
• FIXED vs VARIABLE LABOR COSTS• HIGH TURNOVER, CAUSES & DETERENTS• SAVING ON LABOR• FORECASTING LABOR COSTS• COMPENSATION TECHNIQUES• LABOR STANDARDS:
– QUALITY, QUANTITY, COST• JOB ANALYSIS vs. JOB DESCRIPTION• CORRECTIVE POLICIES
LABOR COST CONTROLKnow Your Target Audience
Food services and drinking places pay mean average wages that are roughly half the national mean wage--$9.84 vs $20.32 (May 2008).
The industry’s low average wage is due to two factors: 1) below-average wage rates for individual occupations and 2) the industry’s occupational mix
The main reason is the predominance of low paying and low skilled occupations--97% of industry employment was in occupations with mean wages below the national mean wages.
Food preparation & serving workers are 23 percent of industry with a mean hourly wage of $8.07.
The waiters and waitresses, are 21 percent of employment with a mean hourly wage of $9.26, including tips.
The highest paying positions in the industry are Food Service Mgrs., General Mgr., Operations Mgr.
Highly paid non-management occupations comprise a very small portion of the industry—dietitians and nutritionists @ $22.59, about .04 percent of industry
sales representatives, services--hourly mean wage of $27.42, about .03%.U. S. Department of LaborBureau of Labor Statistics, 2008
Median Salary by Years Experience Job: Restaurant Manager
Restaurant Managers with 5-9 years experience canexpect earn between $35-$45,000, roughly $16.80 to $21.60 an hour, calculated on a 40 hour week*
*A 40-hr. week is probably unrealistic www.payscale.com
Median Salary by Years Experience Job: Executive Chef
Executive Chefs with 10-20 years experience can expect to earn between $45-$65,000 a year. Calculated on a 50 hour week, which is standard, they will be earning between $17 and $25 per hour.
www.payscale.com
Median Salary by Years Experience Job: Sous Chef
Sous Chefs with 5-9 years experience will earn about $13.50 to $17 per hour for a 50 hour week.
www.payscale.com
Median Salary by Years Experience Job: Pastry Chef
Pastry Chefs with 5-9 years experience will earn about $13.50 to $17 per hour for a 50 hour week.
www.payscale.com
Median Salary by Years Experience Job: Line Cook
Line cooks will earn an average $15 an hour once they have put in 20 years on the job for a 45 hour week.
www.payscale.com
LABOR COSTS
Labor Cost is generally the inverse of COGS
Hi Labor Lo COGLo COG Hi Labor
Tot. Labor Cost% = Tot. Labor (include
benefits) $Total Sales
Labor Classifications
Fixed Labor CostsSalaried employees whose cost doesn’t fluctuate with salesConsidered a “non-controllable” cost
Variable Labor Costs
Hourly employees whose hours/wages can vary with sales
PERSONNEL TURNOVER
One of the major factors driving labor costs in the foodservice industry is high turnover
Improper Training/CommunicationIf personnel don’t know and understand the objectives of the organization, it is difficult to attain them
“Advancement in the foodservice industry is slowing all the time because companies don’t train and don’t provide a pathway to advancement.”
Cost of TurnoverRecruiting & HiringTrainingUnemployment InsurancePotential customer dissatisfaction
PAYROLL BUDGET
Forecast Sales based on available data:
Historical dataReservationsPast Performance during Special EventsCatering Bookings (past and current)Predictions based on expansions/upgrades
Per-employee performance
# of meals served per cook# of tables served per wait staff# of drinks per bartender
Work flow projections based on hours of business
Peaks during lunch/dinnerSlow hours that still need staffing
OVERTIME VS. PART-TIME
OVERTIME PART-TIME Time and ½ No benefits
May be after 40 hr. weekMay be after 8 hr. day Typically less skilled/less pay
Benefits required for full-time May not reach the standards set
because they may not buy into Applies to some salaried employees the company philosophyif they earn less than $23,660/yr.
Have less motivation to show upwhen needed because they have
less to lose
LABOR COST & LABOR %ANALYSIS HOUR BY HOUR TO DETERMINE PROFITABILITY
• .
FOOD LABOR $TOT. %LAB.HOUR COST COST BENE. SALES LABOR COST PROFIT
1 100 100 10 2002 200 100 10 4003 200 200 25 4004 300 150 10 700
TOTAL
LABOR ANALYSISCOST OF VARIANCES vs. BUDGET
• .
BUDGET ACTUAL COST OF RATE TOTALHOURS HRS. VARIANCE VARIANCE PER HR. PAY
DISHWASHERS 35 35 $6.50COOKS 50 55 $12.00
SERVERS 40 43 $3.25BUSERS 15 12 $5.35
MANAGEMENT 16 20 $18.00TOTALS/AVGS.
LABOR SAVINGS STRATEGIES
TechnologyLabor saving equipmentPre-prepped, pre-cooked, pre-portioned
Facility DesignCommissary preparation for multi-unit operationWell designed kitchen that allows more work more easily
Menu DesignFewer items require fewer employeesLimited menu requires less trainingSimply executed dishes require less skill/experienced workers
Style of ServiceFine dining requires trained, skilled staffCasual dining requires less skilled staffSelf-serve or Cafeteria service requires fewer staffTake out requires no service staff
OUTSOURCING
Outsourcing is the fastest growing labor cost savings trend in the hospitality industry.
HR (recruiters and payroll companies) AdvertisingFinance Pre-prepared foodsWaste Disposal Bakery ServicesLinens Food service operationsPest Control
COMPENSATION
Current Compensation--paid within a short timeframe (i.e. pay check) Deferred Compensation—expenses that are shown as current
expenses, but are not paid until the employee is eligible (i.e. pensions, stock options)
Direct Compensation—money given to the employee in a paycheck Indirect Compensation--payroll taxes, social security (6.2%), medicare
(1.45%), health insurance (8-10%), paid vacation, retirement plans , discounts
LABOR COST CONTROL
Performance & Productivity Standards should be
established for each position.
Task Analysis
What needs to be done?When should it be done?How should it be done?
Labor Costs
What can be successfully outsourced Cost-Benefit Analysis compares the cost of doing the task in-house vs. buying
it from an outside source
Specifications should be sent to all potential suppliers sothey are bidding on the same job
Multiple bids should be obtained to get the best cost
Job Specifications are needed for each job
Detail all work to be accomplished by the employeeThe more detail, the better guidance for those hiring
“You can get it done fast, cheap and right
but you only get two out of three at the same time.”
Quality Standards
Should relate directly to the target audience—the concept and positioning of the establishment will dictate the level of expertise needed for each employee
Quantity Standards
Amount of work each employee is expected to manage during a particular timeframe
Cost Standard
Influenced greatly by local laws, government, labor unions and supply and demand
JOB DESCRIPTION
Outline the job specifics (i.e. % of time expected to spend cleaning and stocking
shelves vs. cooking/prepping) Where and when will each task be executed (i.e. will spend a minimum of 1 hour
daily in a freezer at 0 degrees) Provide measurable performance criteria (i.e. expected to learn how to set up the
cold station within the first week of employment) Provide information on the company philosophy and mission (i.e. each team
member is regarded as an integral part of the decision- making team in his department and will be encouraged to be pro- active in making positive changes)
TRAINING
Training is an investment. It is key to reducing employee turnover.
Company PhilosophyGetting employees to “buy in”On-the-Job Training
On going training—New technologyChanges in policyChanges in Menu
Cross training for another position—this is an important way to cut down overtime
and to give employees a pathway to advancement
MOTIVATION
Get employees to “buy in” to the company philosophy and lower turnover will follow.
Financial Rewards:BonusesComp TimeAdded Benefits
Non-Financial Rewards:Open Door policy with managementPositive, Comfortable work environmentFlexible SchedulingRespect from Management
Productivity Quantitative Measures of Productivity:
Count of items completed Covers per shiftSales per Hour Rooms cleaned per shift/per hr.Guests checked in
Qualitative Measures of Productivity:Mystery Shoppers ReviewsCustomer Satisfaction Surveys Industry Recognition Government Reports
Correcting Mistakes: 1. Identify the problem2. Create process to correct it3. Train staff in the new process
4. Discipline
OTHER EXPENSES
• Identify controllable & non-controllable costs associated
restaurant operationbusiness operationfacilities
occupancy
OTHER EXPENSES
Every area of Expense should have standards set for it in order to control costs—Quality, Quantity, Cost.
All standards should be customer based.
Linens Menus
Flatware Music & Entertainment
Cleaning Supplies Utilities
Franchise Fees Licenses
Marketing Product Testing
OTHER EXPENSES
Every area of Expense needs standards
1. Quality2. Quantity3. Cost
All standards should be customer based
Linens Music & EntertainmentFlatware MarketingCleaning Supplies LicensesUtilities Product TestingMenus Franchise Fees
FACILITY COST SAVING STRATEGIESStrategies
Furniture, Fixtures and Equipment
UsedAuctionsRehabedDemo/Floor models
Lifetime Costs—may make an expensive purchase more practical
Trade-in valueDelivery costsOperating costs (consider energy savings)Operating Labor
Facility Costs
Strategies for Savings:
One brand/vendor
Equipment free with Ingredient Contract (i.e. coffee and soft drink machines)
Maintenance through the vendor
OCCUPANCY
LEASE vs. OWN
Lease/Rent
Fixed lease/rent rate vs. Lease + % of SalesFixed lease rate with an increase over time
Own
Pros: Property Taxes and Mortgage Interest Write-offsCons: Maintenance & Upkeep Costs
Facility Costs
INSURANCE
Property & Liability Insurance
Flood Insurance
Catering Insurance for Off-Site Operation may be incrementalbut can be added on a “one time only” basis—“riders”
BUILDING MAINTENANCE
Landscaping—outsourced labor, water costs, etc.Plant maintenance—parking lot, roof, general repair, plumbing & HVACLighting and SecurityWindowsSignage
TAXES & LEGISLATION
1. Local
Smoking RestrictionsEntertainment Taxes
2. State
Dram LawsBlood Alcohol Levels
3. Federal
Minimum Wage LawsFood Standards