How To Control Labor Costs In Your Restaurant

By: KEXY Team
January 20, 2024
News And Tips

Controlling the labor costs of your restaurant is an essential process and balancing act of monitoring and adjusting numerous variables simultaneously. Restaurant operators can’t neglect the significance of labor costs and restaurant stock control. Otherwise, these can significantly drain your profits.

Labor costs are the second-highest costs after food and beverage expenses in the restaurant business. Therefore, it is crucial to monitor and manage labor costs to streamline your business operations and maintain profitability. In today’s article, we will give some practical tips to control labor costs in your restaurant. Read on!

Ebook Download

Understand the Numbers

The general rule of thumb is to set costs for hourly employees between 20% and 30% of your restaurant’s total sales. So, does your restaurant complies with this standard? Take the amount required for payroll and drive it by the total sales to figure your labor costs. For instance, if total sales for the week are $30,000 and the payroll is $6,000, your labor costs are: 6,000 divided by 30,000 = 0.2 or 20%, which is right on target.

Analyzing the numbers allows you to monitor and control labor costs. That way, you can save thousands of dollars. For instance, if total sales are $75,000 per month, reducing labor costs from 1% to 5% means saving $750 to $3,750 per month. So, this leads to saving $9,000 to $45,000 per year.

However, suppose you want to avoid the hassle of calculations and stay on top of the labor costs. In that case, we recommend relying on your restaurant order management, restaurant inventory, restaurant stock control, and POS system to manage all the data crunching for you.

Develop a Proactive Strategy | Control Labor Costs


Controlling labor costs requires developing and implementing a proactive strategy instead of a reactive system or method. Thanks to cutting-edge and advanced management software like KEXY, you can create a more detailed plan to manage labor costs effectively. KEXY allows you to benefit from the precise forecasting tools, leading to accurate sales estimation any day, each hour, and even every five minutes.

When you use this information, you can schedule your kitchen and waiter staff adequately than ever before. Besides, you can benefit from the historical data through the KEXY software system and anticipate your scheduling needs during seasonal trends. KEXY is one of the best restaurant software management systems, allowing forecasting reports to schedule the right amount of staff during events.

For example, you can precisely schedule the right amount of staff over Christmas and New Year’s Eve or during the summer season when your patio is open. Moreover, you can use this data or information to prepare your staff for the increased demands and ensure your employees stay at the top of the game.

That’s why you need to act proactively and develop a solid strategy to optimize your restaurant processes, leading to reduced food costs and labor costs. Thus, you can generate more revenue and increase profitability.

Employee Performance

Best Control Labor Costs

Focus on employee performance when developing a strategy to control labor costs in attendance and time. Start by checking hours worked and focus on the schedule. Analyze when your employees clock in and out and whether they follow the rules for breaks.

A sophisticated management system like KEXY can quickly provide this data and information, including sales generated by each of your employees. You can also benefit from your POS system to prevent your staff from clocking or early or taking long breaks.

In addition, you can generate performance reports that indicate the hours worked for all of your employees, the sales they generated, and the number of customers processed. Make sure you focus on other reports, such as:

  • Sales per category or division
  • A check report
  • An activity report
  • A counter-report
  • An open table report
  • Current or previous shift reports
  • A workstation report

You can also use employee performance information to schedule your staff adequately. On the other hand, if you schedule all of your highest performers during the same shift, you will waste your labor resources. That’s why it is crucial to spread out your highest-performing employees and schedule one or two per shift. The purpose is to ensure your employees set the pace.

Avoid Overtime

What are other areas where you can control labor costs in your restaurant? Overtime is a critical factor that can potentially drain on your labor costs. However, this is an instance where you can benefit from the data and tools available through KEXY to improve results.

Use your POS system along with the KEXY restaurant stock control system. The purpose is to monitor over time and adjust the schedules as required. Your POS system allows you to set different levels of pay for overtime. For instance, you can set one rate for hours worked above 40 but less than 65 and another for 65 hours and over.

In addition, you can also establish a single rate of hours over eight in one day, but less than ten, and another rate for hours over ten. KEXY system integrated with your POS system has a lot of power to help you control these costs. Make sure you fully utilize the software system’s features.

Moreover, take advantage of all the productivity tools you use in your restaurant. Focus on automation capabilities available through KEXY to maximize efficiency and save time from front-of-house (FOH) to the back-of-house (BOH) of your restaurant.

For instance, use handheld devices on the front end to process tableside orders efficiently and quickly and carry out some line-busting when required. You can also use video displays systems in the kitchen to speed up order preparation.

Other essential applications you need are checking table status, managing the waitlist, handling online carry-out orders, and automating confirmations. All these applications can free up more staff time. Keep reading!


Cross-training is an effective strategy you can implement in your restaurant to control labor costs. You can schedule less staff and meet your service standards with numerous kills and abilities to work in different restaurant areas.

For instance, if your cook can manage the grill in a pinch or someone on your staff can work at night, you can stretch a smaller staff to cover all the bases. That way, you don’t need to schedule a bartender on a slower night because the server staff can take care of such orders.

Training is another critical area where you can rely on KEXY and POS systems to carry the load. From documents to user manuals that you can customize for specific software set up, graphic recipe displays with preparation instructions, video instructional content for kitchen, bar, and wait staff, KEXY is your partner cross-training your staff.

Moreover, your POS system enables you to manage and track your restaurant’s staff to whom you have cross-trained and assigned different positions. You can designate these employees with separate or multiple roles, and they can use these roles when signing in and out. Your employees can access the POS terminals using their log-in information, such as in the bar, dining room, or patio.

Final Words

Most restaurants and bars operate on a 3% to 5% of profit margin, which leaves no room for spending extra money on unnecessary staff and tasks. That’s why we recommend implementing food cost control strategies.

You must make it a crucial objective for your restaurant. When you manage food costs through a restaurant inventory management system like KEXY, you can ensure your expenses align with your profit margin and do not affect it negatively.

Managing labor costs requires you to look at different areas of your restaurant and analyze various business processes. Remember, it is not about performing one big thing, but it is all about focusing on numerous smaller things.

Thanks to advanced technology and a plethora of tools available for restaurants, you can streamline your business operations, stay on top of multiple variables, and fine-tune your labor costs control strategies. The purpose is to balance your expenses, generate more revenue, and increase your profitability.

Although managing or controlling labor costs is not the central aspect of your restaurant, you can’t ignore the issue because this can risk your operations, leading to decreased profits. Use the KEXY restaurant management system and integrate it with your POS system to achieve optimal processes. Until Next Time!

Follow us on Facebook

Follow us on Twitter

Follow us on Instagram




KEXY Bites is your go-to hub for all things food and beverage. Whether you're a retailer, supplier, or distributor, we deliver insightful content that ignites fresh thinking for your business.