How to reduce labor costs in your restaurant during a tight labor market

When it comes to the costs of running a restaurant, labor is one of the big ones — generally accounting for around 30% of revenue. In today’s landscape, most restaurants are struggling to simply find (and keep) workers. And with pay rates rising due to competition for scarce resources, not to mention overtime pay for the few servers that many restaurants do have, labor is taking an even bigger bite out of restaurant revenue.

Between the difficult labor market and rising food costs (looking at you, inflation), there’s no better time for restaurants to optimize those payroll dollars. So how can you reduce labor costs in your restaurant right now? The strategies below can be highly effective, even in the midst of the labor crunch.

Schedule smarter

There’s nothing worse than having servers on the clock standing around with nothing to do — or having too few servers on the floor when you’re slammed. But predicting what business will look like when you’re setting a schedule can often feel like a guessing game. Give yourself a leg up by leaning on technology that can forecast sales and tell you exactly how many bodies you need to schedule to meet the projected demand.

Restaurant employee scheduling software with sophisticated forecasting tools make it simple to staff based on everything from projected sales to slow / busy times and employee productivity. Applying various factors to your forecasts automatically minimizes the hours you’ll spend on scheduling — time that can be better spent training your team to work more efficiently and increase productivity. Read more about how to simplify payroll with restaurant labor management software.

Adjust your schedule continuously

Scheduling should never be a set-it-and-forget-it task. Keeping in mind your state’s current labor laws, many of which include rules about last-minute changes, it’s important to adjust your schedule to accommodate the flow of business during any given week. Are sales unexpectedly trending up or down? Adjust your schedule accordingly to avoid over- or under-staffing.

As for those ever-changing — and constantly expanding — labor regulations, heavy-lifting tech can help here as well. Many predictive scheduling systems will prevent you from violating labor regulations and getting dinged with penalty pay through alerts and warnings. The best tech will simply not allow you to schedule a server for a time that will violate a regulation.

Minimize overtime

Overtime can add up quickly and take a big bite out of your bottom line. Make sure employees are clocking in and out at the correct times, and nix any “buddy punching” when one employee clocks in or out on behalf of another. Of course, sometimes overtime is necessary and well worth it, as when there’s a big event near your restaurant and you need to schedule servers to work extra hours to cover the influx of business. In these cases, the sales can more than make up for overtime costs.

But what if you’re paying overtime as a necessity simply to keep your business running? The lack of available labor has put many restaurants in this position, where the few available servers work much longer shifts — and watch their paychecks skyrocket thanks to all of the overtime pay. In some cases, it may make sense to take advantage of gig staffing options that focus exclusively on the restaurant industry. While you’ll pay a premium to access experienced servers last minute, it may still cost less than paying all of that overtime.

If you’re short on staff, forced to pay exorbitant overtime, and gig staffing options aren’t available (or the numbers simply don’t work out), you may consider temporarily cutting back your business hours. Forecasting software can help ease the blow by showing you when and where it may make sense to trim hours without missing out on too much business.

Reassess your staffing needs

When’s the last time you took a hard look at how much staff you actually need to run the restaurant? How many full-timers should you have versus part-time workers? And for what positions? While there’s no easy one-size-fits-all answer here, it pays to consider who you really need on your team.

Full-time employees can, of course, be more costly due to the requirement to provide them with additional benefits. However, if you’re a small business with fewer than 50 employees, you may not be subject to these requirements. Either way, having at least one full-time employee on staff in key positions can pay off, especially with turnover so high. You’ll want a reliable employee who has mastery over their domain to train new staff when they start, be it prep, serving or even running the host stand.

Part-time employees come with their own set of advantages. It’s obviously helpful to have a bigger pool of labor to pull from when holidays and sick days roll around. Consider also that part-time workers can make it easier to grow your business. We all know that restaurants grow from the peaks, and as your busy times slowly get longer, you can easily extend your part-timers to cover the growing peaks.

Seasonal employees can also be a cost-effective way to boost your staff during your busy season, be it the summer months, the holidays, or both. Hiring foreign workers who are on a work visa has the advantage of having them for a limited time that coincides with your busy season. The same goes for covering the holiday or summer rush with students who are temporarily back home and available to work. Consider your specific needs when coming up with a staffing strategy for using full-time, part-time and seasonal employees.

Cross train your staff

Cross training your staff to be able to take on different roles can cut down on labor costs, especially when you’re in a pinch. Training a server on the basics of bartending, for example, can give you options when your bartender calls in sick at the last minute. Losing one of 10 servers on the floor is a lot better than closing the entire bar station for the night.

Related: How to motivate restaurant employees to perform better

This can even extend to less obvious areas, like marketing. Slow night? Why not let the host show off her social media skills on your restaurant’s account? Whether you coach up employees in tasks outside the scope of their responsibilities or allow your team to play to their strengths in different areas, cross training is a best practice that always pays off.

Strive to be a best-in-class employer

You’ve heard the stats: replacing a single employee can cost restaurants north of $5,000. And according to the Bureau of Labor Statistics, the hospitality sector currently has the highest quit rate of any industry. Now more than ever, reducing turnover can significantly ease your labor costs. To become a best-in-class employer that can successfully attract and retain staff, you’ll need to start by investing time into the interview, hiring and training process.

Once you get employees on board, a streamlined training process and intuitive tools that make a server’s job easier will go a long way. It’s also crucial to make your restaurant employees feel valued, which you can do by showing them genuine appreciation, giving them an open forum for feedback and rewarding their good work. Not only will your efforts pay off in reducing turnover, you’ll have motivated employees who are more productive and provide better service.

While it may feel like a daunting time to focus on lowering your labor costs, the strategies above are effective and accessible — and may even help you fill those open roles. Even a seemingly small step like cross training can lead to a big payoff.