Labor costs include a number of factors and should be calculated weekly.
Labor is crucial to the success of any business, but can also be one of the highest costs. Private clubs are no exception. With the kitchen being the busiest area of any club, a chef undoubtedly has the most labor to control. Employees are expected to provide high quality service and to always be available to members, so being able to provide both while staying within budget can be challenging.
Calculating labor is more than just totaling all employee wages. A chef’s labor cost includes salaried and hourly employee wages, bonuses, overtime, holiday pay, payroll taxes, health care, sick and vacation days. Anything even remotely related to employee wages is considered part of labor cost, including training costs, supplies, and meals.
To find the labor cost percentage, the sum of all labor is divided by total food sales. It is recommended to keep labor percentage around 30%. However, depending on the style of dining, such as fine dining, labor could be as high as 40%.
Because labor cost includes so many different variables, it can be helpful to separate labor cost by the various roles of a kitchen. It is important for a chef to use a POS system that can provide labor and sales reports to better manage these costs. With these detailed reports, a chef can test different combinations of staff and shifts to streamline labor costs.
Chefs also need to be aware of overtime and holiday rules for their state. Many require employers to pay time-and-a-half or even double-time to employees who work over 40 hours in a workweek. Club kitchens are notorious for long work hours and operating during almost every holiday, but it is best to hire and schedule employees to avoid any overtime costs.
Most private clubs have a Chief Financial Officer who will calculate labor costs. A chef will have to double check payroll and that employee hours are correct every week. The CFO will let a chef know if their labor costs are not within a desired budget. Every club is different, but most chefs only have to include kitchen staff in their labor cost, while the front of the house is separate. However, front and back of the house will most likely be combined under the Food & Beverage budget for total labor costs.
Calculating a kitchen’s labor cost is not difficult. It is keeping this cost within a club’s budget that can be challenging. There are many tools available to clubs to help calculate and manage these ever-increasing costs, allowing a chef to put more focus on the dining experience for members.