How to Get Your Labour Cost Under Control Without Ruining Your Team Culture

Labour is typically the second largest cost in any hospitality business. In many venues it is actually the largest. And unlike food cost, which has clear benchmarks and relatively straightforward fixes, labour cost is messy, emotional and politically complicated inside a team.

But getting it right is not optional. Labour running above 35 percent of revenue consistently is a serious problem. Above 40 percent and you are almost certainly losing money regardless of how busy you look.

The real cost of a team member

Most operators think about labour cost as the hourly rate. That is only part of it. By the time you factor in superannuation, payroll tax, workers compensation, training time, uniforms and the administrative cost of managing that person, the true cost is significantly higher than what shows up in the timesheet. Understanding this does not mean you understaff — it means you staff precisely.

Your roster is a revenue tool

Most operators build their roster based on who is available rather than what the business actually needs. A well-built roster is based on your historical covers by day and by hour, your average spend and your service standards. When you approach it that way, you stop paying for labour during the periods that do not justify it and you stop being caught short during the ones that do.

Pull your covers data by hour for the last 30 days. Look at where your labour cost spiked relative to revenue. Those are your starting points.

The Sunday problem

Penalty rates on Sundays and public holidays catch a lot of operators off guard. Many venues are losing money on their Sunday service because the true labour cost — once penalty rates are factored in — exceeds the revenue that service generates. Do the maths honestly before you decide to trade. Sometimes the right answer is a reduced menu with a smaller team. Sometimes the right answer is to close.

Training is a labour cost lever

A well-trained team member works faster, makes fewer mistakes, wastes less and needs less supervision. The time invested in training in the first few weeks pays back across every shift that person works for the rest of their time with you. Cutting training time when you are busy is cutting the wrong thing.

Where to start

Pull your last four weeks of payroll and compare it against your revenue week by week. Build a roster template based on your actual trading pattern, not on habit. And review it every week against the result. If you want a proper labour cost analysis done on your venue, Pestle and Mortar can work through your numbers with you and show you exactly where the savings are without touching the things that matter to your customers. Find out more about our labour cost consulting.