5 Ways to Minimize Restaurant Labor Costs

As restaurant operators navigate the challenges in the market, rising labor costs continue eating away at the industry’s already low profit margins. Learning how to manage these costs more effectively is now more imperative than ever. Restaurant owners and managers must be creative and innovative if they want to maximize their labor potential and minimize this this expense. To stay ahead of the curve they will need to embrace organizational change, new technology, and other opportunities that are brought by the changing workforce. 

Here are 5 creative ways to minimize labor costs in the food industry:

1.      Consider a more diverse mix of workers - Diversifying the types of workers on staff can work wonders. Mix full-time and part-time employees to get some relief on paying benefits. Full-time positions should be reserved for more experienced staff and employees who want to grow in the company. Part-time positions can be used to help less experienced workers become acclimated to the business and give you the scheduling flexibility you need. Seasonal workers should also be considered and will save you from having to maintain excess workers on staff just to cover holidays and busy seasons. A less common option is independent contractors. These are 1099 workers whose wages you don’t have to pay taxes on (or withhold) and would work well as servers and bartenders.


2.      Take Advantage of Tax Credits for Employers - You can save money by hiring certain groups of people, like disabled veterans, people with disabilities, ex-felons, and food stamp recipients, who face challenges finding a job. The WOTC Credit (Work Opportunity Tax Credit) can save you up to $9,600 per qualifying employee, leaving you money to invest in other areas of the business. This could potentially eliminate your federal tax bill and give you a tax carry forward for the next 20 years. This requires a bit more paperwork, but the payoff might be worth the extra effort. For more information, visit the IRS website.


3.      Reduce Overtime - The key to reducing overtime is scheduling more efficiently. With schedule management software you can utilize predictive scheduling to base your staffing needs on real, historical data. This will help you eliminate overscheduling and save time and effort dealing with schedule change requests. Labor management tools can also help you track local events, holidays, and other factors that may significantly affect your business. Many of these tools come with overtime alerts to let you know before you schedule someone into OT or holiday pay. With restaurant enterprise reporting, you can view the schedule history and labor data in executive reports to make better decisions about when and who to schedule versus using pen and paper.


4.      Lower Employee Turnover - For many years, restaurants have been plagued with a higher employee turnover than other companies. It was accepted as a part of doing business in the industry, but there are actually strategies managers can employ to lower turnover. Invest in a quality onboarding and training program. According to SHRM (Society of Human Resource Management), 69% of employees are more likely to stay with a company  for three years if they experienced great onboarding. The best onboarding processes focus on helping new hires build personal relationships and network within the company as well as educating the employee about his role and the organization’s culture. Assigning a mentor or establishing a buddy system is a good idea. It’s also important to give the employees quality training to give the best opportunity for success and growth. Employees must feel valued, and this begins from Day One.


5.      Invest in Technology - Advanced technology offers plenty of options to help you minimize your labor costs. From online ordering to giving customers touch screen computers and tablets upon their arrival, you have the opportunity to restructure your restaurant business in a way that requires fewer staff to operate. Food delivery apps, like Uber Eats and Door Dash, are also revolutionary. Customers can enjoy your food in the comfort of their own homes, allowing sales to remain steady while labor costs decrease since you don’t need as many servers and greeters to provide service.

There are numerous strategies you can employ to help lower labor costs. We encourage you to invest time into strategic labor management to help reduce your labor costs. You may be surprised at how much a single change can save your company.

Restaurant Magic Software has been providing advanced software solutions to the restaurant and hospitality industry for over 20 years. The robust Data Central Management Suite, the flagship product, is a powerful and flexible application that takes advantage of the latest technology trends to offer premier processing and analytics. With advanced forecasting, predictive scheduling and mobile technologies, Data Central has something for every problem. To learn more about Restaurant Magic Software and its products, call us at 1(800) 933-4711 or visit the website at RestaurantMagic.com.