Labor Cost Reducing Tactics

Ben Beddow

Published March 8th, 2022

Labor costs are one part of a restaurant’s prime costs, and prime costs are responsible for over half of a restaurant’s overall costs. Restaurant labor costs are one the most controllable costs for a location, and the results of properly managing a restaurant’s labor costs can be realized almost immediately.

Controlling labor costs is crucial to a restaurant’s continued survival. But labor costs for restaurants are not a stationary target. A venue’s labor costs are dynamic throughout the year, fluctuating with business, and they will change year on year as business levels change.

Here we’re going to use the labor cost dollar amounts to calculate a figure that can be used to assess how efficient a restaurant is when it comes to its labor costs. After that we’re going to look at labor cost reducing tactics that can be implemented to bring those costs down.

Labor Cost Reducing Tactics

What Should Labor Costs Be In a Restaurant?

How to Reduce Labor Costs in a Restaurant

A quick tip is to also calculate labor costs by department, i.e front of house and back of house. This can help to pinpoint where labor reducing tactics might have the greatest effect and could tell you which ones to implement first. Labor reducing tactics focus around two goals: 

• Increasing employee efficiency to reduce the amount of time they spend on the clock
• Balancing staffing levels with expected business levels

If there is a method to achieve one of these goals, without reducing the quality of service to guests, then it can be counted as a labor reducing tactic.

Sidework Sheets

Recipe Cards

Cross Training

Reducing Overtime

Self Ordering

Cutting Employees

Review Scheduling Practices

Increase Employee Retention

Labor Management Incentives

Final Considerations

When reducing labor costs, especially when looking at staffing and scheduling, it is good to keep in mind that labor costs should never be reduced at a detriment to the level of service expected in that establishment. Finally, if a location’s labor costs are not where they need to be, and they cannot be reduced further without being detrimental to customer service or employee satisfaction, then managers and and owners will want to look at other cost reducing tactics as well as methods of increasing revenue that don’t involve an increase in labor costs e.g. menu engineering.