5 Ways Restaurants Can Reduce Payroll Costs

After a challenging year, many restaurants are looking for ways to reduce costs. The typical answer to this challenge is cutting hours or cutting employees altogether, both of which create yet another issue as your restaurant becomes short-staffed and you struggle to provide that exceptional customer experience your patrons know and love. 

Surely there is a better way — a way to save money without sacrificing your restaurant’s high standard of service. You need effective strategies to manage your operating expenses, and we can help. To get started, here are five actionable ideas to reduce payroll costs.

1. Calculate Your Current Labor Costs

You can’t know where you’re going without first knowing where you are. As such, the first step in reducing your payroll costs is taking a good hard look at your current spending. Math may not be your idea of fun, but you need it to get the most accurate picture of your finances and determine where you can reasonably cut costs.

Calculating your current labor costs enables you to make better-informed decisions regarding your restaurant staffing. You can do this manually or using specialized software. Either way, we believe it’s important for you to know how these equations reflect the reality of your business. So let’s break down a few particularly significant metrics.

-Labor cost: Salaried wages + hourly wages + bonuses + overtime + payroll taxes + healthcare + sick and vacation days + any other labor-related costs.

-Labor cost per hour: Hours worked by FOH, BOH, line cooks, etc. * total employees / weeks per year.

-Restaurant payroll percentage: (Labor costs related to sales)  = total payroll costs / total revenue.

-Prime cost: (Food + labor related to sales) = prime cost / total sales.

2. Close the Revolving Door

You may not realize it, but it can cause a significant drain on your finances to have a revolving door of employees. Unfortunately, the restaurant industry has a longstanding history of high turnover rates. According to the National Restaurant Association, the turnover rate in the restaurant industry was at 74.9% in 2018 and continues to tick upward. Reasons include other opportunities with better pay, difficulty with management, and even the need for more flexibility with scheduling. The lockdown increased this turnover even more, as many restaurant workers have had to find jobs in industries that offered more stability during the pandemic. 

Constantly hiring and training new staff members eats up payroll and contributes to staff inefficiency. So when trying to grow your business, your primary focus shouldn’t be bringing on new people; it should be maintaining a loyal staff that sticks around. Incentivizing your current employees and keeping them happy means better stability and can reduce your payroll costs.

This begs the question: how do you keep staff happy? That’s a whole topic unto itself, but you can start by bearing in mind that people love to feel like their hard work and dedication are seen and appreciated. Rewarding your employees not only motivates them to keep working hard but also reduces the chance that your staff will jump ship and saves you the headache of uploading that Indeed job posting for the umpteenth time.

3. Automate Where You Can

Another way you can reduce payroll costs in 2021 is to automate some of your daily operational tasks. Contrary to popular belief, technology isn’t the enemy, snatching up jobs and depersonalizing your relationship with customers.

In actuality, introducing tech into your process — such as an omnichannel management platform like Deliverect — can reduce costs and help managers and staff alike breathe a sigh of relief. Deliverect saves you time and labor hours by providing full integration with your online ordering channels, existing POS system, menu, and stock management, all with an intuitive reporting dashboard. And together, these features produce one extra-attractive benefit: more revenue.

4. Cross-Train Your Team

Finding the right people can be challenging, but once you’ve struck gold, the next step is to provide them with cross-training. Ensuring that your team is well-rounded equips them to handle multiple tasks and roles, helps cover staff shortages, and leads to growth in their professional capabilities. It can also reduce payroll costs.

Glassdoor reports that when you provide excellent onboarding and cross-training opportunities, it can improve employee retention by 82%. And with cross-training, your team members can easily rotate into whatever role you need them to if someone leaves you high and dry. There’s also the potential to develop empathy between different teams, help your staff become more efficient, and improve peer training for new hires.

5. Watch the Clock

Accountability and punctuality are pain points in the restaurant industry, and it can add up if your employees are consistently clocking in too early or staying too late. To cut down on this occurrence, we recommend keeping one eye on the clock-in records.

No one wants to hound employees about their timecard. However, monitoring the clock can significantly reduce payroll costs. The trick is to set expectations for what is considered acceptable behavior. Have clear, polite conversations with staff outlining what you consider to be reasonable hours and prohibiting costly timecard issues like “buddy punching.”

The easiest way to get things on track is to schedule smarter. Coordinate your employees’ schedules with dinner rushes and keep upcoming holidays or events in mind. You can also invest in a GPS time clock tool, which allows you to see who’s clocked in at which location, block overly early timecard punches, and even get a real-time view of who missed a punch or is close to overtime.  

Deliverect: Helping You Cut Costs

Recouping your lost revenue can be challenging in the recovering post-COVID restaurant industry. However, you can employ our tips for reducing payroll costs to save money while still keeping your employees happy. Deliverect is here to help as you bring your restaurant to new heights of success. Our omnichannel management tool can reduce human error, streamline your FOH and BOH processes, and assist you in providing an excellent customer experience.

Are you interested in learning more about our software and how it can boost your revenue? Contact our team today!