Restaurant Payroll: The Ultimate Guide For Business Owners

what percentage of payroll for restaurants

Most restaurant staff are paid hourly, which means that business owners have the ability to make fine-grained adjustments to employee schedules. In the ideal case, the number of staff on hand should exactly match customer demand. Tracking your sales and labor data in real-time allows you to make accurate determinations of whether your staff is being used optimally. The best modern restaurant management software integrates with your POS to offer actionable real-time data to managers. When it comes to reducing labor costs, nothing is more effective than strategic automation. At INFI, we help restaurants keep their labor costs low while keeping their quality of service high with our industry-leading self-ordering kiosk solution.

Don’t skimp on the menu items that will be your specialties, and consider what store-bought items you will make from scratch such as sauces and breads. At the beginning, you’ll want to maintain a tight cap on your food costs to maintain cash flow while you are determining your demand. A restaurant’s payroll for restaurants prime cost should ideally be 60% or less of total sales and represents the bulk of controllable expenses. Assign front-of-house staff such as servers, hosts, and bartenders to one group. Kitchen staff such as cooks and dishwashers are another natural group, as are management staff.

Payroll Report Examples

Find this figure by adding up total labor costs over your chosen period of time. They also include often overlooked employee-related expenses like overtime pay, benefits, payroll taxes, and paid time off costs. Consult your accounting software or payroll provider for help finding these figures. If your restaurant management software is fully integrated with your point of sale (POS) system, you have access to powerful tools that can help you reduce payroll costs.

Your employees will be pleased with the timely and consistent nature of their paychecks, and your payroll records will remain clean. Additionally, having an accurate picture of your restaurant’s financial health is critical to safely withdrawing money from the business through owner distributions (a.k.a. profit taking). Running a restaurant can be unpredictable, so we appreciate that Rippling makes it easy to reimburse staff when they have to run out to buy ingredients. We like that the mobile app lets employees keep track of their hours worked, enroll in benefits plans and request time off.

How to Calculate Your Restaurant’s Labor Cost Percentage

This is showing an example employee report from Gusto where the employee can see what they have earned in the current pay period and year to date. It is also showing all of the withholdings and paid time off calculations. Between increased costs, labor shortages, and socio-economic complexities – staying on top of labor costs is more important than ever for franchise owners.

If your restaurant needs time and attendance software, look for a provider that goes beyond syncing hours worked with payroll. The best solutions also send overtime notifications, allow for paid time off (PTO) management and track regulatory compliance. Many providers offer restaurants flexibility with unlimited payroll runs while others only allow certain pay schedules, such as biweekly or monthly. Consider how often you need to pay employees and if you might need to run irregular payroll like paying contracted staff for a party or catering event. Most restaurants will need a solution that automatically calculates multiple pay rates for their floor staff, kitchen workers and managers.

Understand regulations and labor laws around employee tips

It’s becoming common for us to do more than four turns on a table at night. Better margins enable us to price more competitively and pass on our savings at a time when everyone is feeling the squeeze; almost all of our pastas are under $20. Our staff is paid competitively, and even I am taking home a regular, decent paycheck, something that happened only occasionally before. If you’re used to creating a shift schedule based on a gut feeling rather than data, you could be paying more than you need to. Remember to adhere to local fair labor laws if you decide to split shifts. In most places, you won’t be able to spontaneously tell an employee to leave in the middle of the day.

what percentage of payroll for restaurants

The most scalable and repeatable way to train staff is through organized programs. You might have a server training program, a cook training program, a hostess training program, etc. You can get the content for these programs by modeling your best performers and asking them to explain their processes and decision-making. Incentivize your staff to work the way that best supports your business. It’s up to you to devise a compensation incentive scheme that matches the specific needs of your restaurant.

If the large restaurant generates enough sales, though, then its payroll percentage might actually be lower than the fast food restaurant’s. 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. Let’s explore what restaurant payroll percentage is, how to calculate it, why it’s an important metric to track, and how INFI’s industry-leading POS system can help you lower labor costs. Especially since many positions in the restaurant industry are paid on an hourly basis, a streamlined scheduling process can make an enormous difference in your operating costs. Tools like scheduling software can help you monitor overtime and track whether you are meeting your payroll percentage goals.

An example incentive is offering bonuses to staff that are willing to close on weekends. The right incentive program aligns your business goals with employee financial motivations. Of course, there’s natural variability in human performance, and it may not be possible to bring all of your staff up to the same level, but by merely attempting such training, you put yourself ahead of most restaurants. Your restaurant software should empower you to reference relevant data sets for all manner of labor and financial management decisions. Using historical sales data is an example of data-driven decision-making. This should be adopted as a general management practice to control costs.

Labor Cost Portion of Prime Cost

As we mentioned above, you would do this when you figure out each employee’s gross pay. Gross pay for your restaurant payroll simply means the total amount of wages before you take out any taxes or deductions. Restaurant payroll is unique in that employees often fill more than one position during a pay period.

  • Consult your accounting software or payroll provider for help finding these figures.
  • Finally, we all know the restaurant industry is afflicted by high employee turnover.
  • Some providers don’t offer coverage in all 50 states, so check to see if benefits are available where your restaurants are located.
  • And so that’s what the Fiscal Hawks say, hey, we need to make some changes over time.
  • You don’t want to waste time trying to implement a payroll service, so make sure your final choice is easy to set up and offers personalized assistance.
  • Next, you will want to add up all sales before deducting any expenses.

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