Knowing your labor cost percentage is important because it can inform different business decisions and it serves as a barometer for profitability. In Clinton’s vision, a job was the locus of assistance, the door through which all other help would pass. But while Welfare Reform introduced the job requirement, few of the benefits he envisioned ever materialized. In his first term, Clinton tried to pass legislation that would have required low-wage employers to cover healthcare costs. Even as these job opportunities emerged, however, the pay was so low, fast food franchisees often struggled to recruit employees.
Strategies For Decreasing Labor Costs
Make sure you’re paying taxes for all levels of government that affect you and your employees — including federal, state, and local taxes (if applicable). An easy way to calculate payroll for restaurants payroll taxes and wages is to use a paycheck calculator like this one. After choosing a payroll schedule, set up direct deposits into your employees’ bank accounts.
New York Tax Information
- Even paying above minimum wage can be a cost-effective way to keep hiring and training costs in check.
- When your restaurant is properly trained, you have more flexibility in your scheduling.
- With this knowledge, you might discover that you’re spending too much on labor and need to reduce your costs.
- Fine-dining staff often need special skills, experience, and a talent for providing the best service, and they expect to be paid accordingly.
- It is far more helpful to analyze what payroll percentage goal maximizes your profitability at your specific restaurant, without sacrificing your level of customer service.
Selecting the best payroll software platform for your business can be tough. You’ll need to consider several factors, including the size of your restaurant and how many locations you manage. You also need to consider your specific payroll needs and any “must-haves” that are on your mind.
Key features to look for in restaurant payroll software
Be sure to include rent, utilities, marketing, software subscriptions, food costs, uniforms, and all other expenses. To calculate your payroll percentage, you will first need to add up all of your payroll-related expenses for a given period of time to calculate your total payroll cost. Once you have this number, divide it by your gross revenue and multiply by 100 to convert the number into a percentage. Though sometimes outpaced by the cost of goods, restaurant labor cost is typically the most significant expense in the restaurant industry. This makes labor cost percentage an important metric for restaurant owners to track as they go about trying to optimize their restaurant operations for maximum profitability.
What is Restaurant Payroll?
Keep your payroll on the right track by training and cross-training staff to reduce your labor cost percentage. With a robust staff scheduling software, like TouchBistro Labor Management, you can use shift, guest, and sales data pulled from your POS system to accurately predict your labor needs. You’re able to build your schedules based on various labor targets, like in this case labor percentages, so you can more accurately staff your restaurant. R365 Scheduling enables you to create schedules based on sales forecasts to reduce your labor spend, save time, streamline the scheduling process and engage with employees. R365 Scheduling is integrated with R365 Payroll + HR, R365 Accounting Software and R365 Operations Software.
- Find this figure by adding up total labor costs over your chosen period of time.
- The FICA tip credit attempts to ameliorate the financial burden of paying these taxes on the employer.
- Most restaurant operators go with monthly, weekly, or bi-weekly schedules.
- It’s also your unique identifier for any paperwork involving the IRS, Social Security Administration (SSA), and Department of Labor (DOL).
- To calculate cost of goods sold (COGS), add together beginning inventory and purchases, and then subtract ending inventory.
A restaurant’s prime cost combines its total labor costs with its cost of goods sold (COGS). It’s important to set a goal and use that as a benchmark for your restaurant’s overall results and financial performance. You can set a goal to keep your labor cost percentage under, say, 30%, and build a monthly or quarterly budget based on that number. It may become clear that you consistently run at 35% rather than 30%, which means you’ll probably need to make adjustments elsewhere in order to maintain profitability. This is a delicate balancing act that all begins with closely measuring and evaluating your costs.
- We’ve crafted this piece to help you make more sense of your restaurant labor cost and the impact that it has on your bottom line.
- It allows employers to take a credit against their federal income based on the amount of FICA and Medicare taxes paid on tips reported to the employer.
- When trying to set your restaurant’s budget, labor costs are obviously a huge factor.
- The right incentive program aligns your business goals with employee financial motivations.
- Regarding rest breaks, New York has no law in place requiring restaurant managers to offer rest breaks to their employees.
The Complete Solution
To optimize your payroll, consider offering flexible scheduling to your staff. That is, try to align their working hours precisely with customer demand. If you know you’ll need an additional server from 6 – 9 pm on Fridays and Saturdays, make that someone’s schedule. By having staff on hand only when needed, and not working during quiet periods, you’ll support the guest experience while minimizing labor cost. If you wanted to track your monthly labor costs, you would first add up all costs as outlined above. Next, you will want to add up all sales before deducting any expenses.
