Can You Reduce Restaurant Labor Costs Without Cutting Labor?

4th June 2014
A Creative Commons photo of a flip clock by Martin Terber

Keeping labor costs in check is one of the most important things a manager or owner of a restaurant has to do in order to maintain profitability. A lot of focus is often put on improving how staff are scheduled, sending people home at the right time and other “trimming” exercises – and this is important. But as important, is ensuring that staff are working effectively and generating value when they are present and “on the clock”.

In this post we cover three negative behaviours that can have a dramatic impact on a restaurant’s labor costs. They are Buddy Punching, Early Clock-ins, and Late Clock-outs.

Buddy Punching

Buddy punching refers to when an employee has a co-worker punch them in early (often so they don’t appear to be late) or punches them out after they leave. In a busy restaurant Buddy Punching can be hard to detect. The first step to reducing this behavior is to remind employees during staff meetings that it is a serious offence by both parties, is a form of theft and can be cause for suspension or dismissal.

An increasingly common way to eliminate Buddy Punching entirely, is the installation of a fingerprint reader. This allows employees to scan their finger to clock-in and out, rather than using an ID that they might share with their friends. These readers are not prohibitively expensive and when used in combination with a product like LiveHR (learn more about LiveHR here), they can dramatically reduce wasted labor.

Early Clock-ins

Often companies have a policy that employees must arrive 15 minutes before a shift. In some areas, that can mean the company is obligated to allow the employee to clock-in and be paid for this prep-time. Instead, consider enforcing a policy where employees must be fully outfitted, clean and completely ready to begin their shift at the time it is set to start. Otherwise, it may be the case that your organization is paying employees to get into their uniforms and in general finish up items they should be doing before they begin their shift.

In addition, some employees who arrive early consistently, for example because their bus arrives 30 minutes before their shift, may repeatedly clock-in earlier than they should, but not have anything productive to do. Or, even if they are being productive, they may be completing work that could be done later during a slower part of the day. Some payroll and HR systems can require an employee receive a manager override in order to clock-in before a shift is scheduled to begin. Enabling a simple feature like this can have a big impact on labor costs (more on labor cost management solutions here).

Late Clock-outs

Many employees will forget to punch out at the end of their shift. Most times this isn’t intentional. But in their excitement to leave work, rush to catch a ride home or general tiredness they just forget. Sophisticated HR and payroll systems can notify managers when an employee hasn’t clocked-out after their shift ends. They can also highlight exceptions on payroll reports so a restaurant owner or senior manager is aware if employees do this consistently.

In both the case of employees who are simply forgetting to clock-out and those that are intentionally riding the clock, technology can help spot and reduce this behavior. For example, try running a report that shows employees who were not clocked-out until the end of the day. Many systems will automatically force a clock-out of all employees before end-of-day reports are run. Looking at which employees this is occurring with and then cross-referencing their schedules can show if this is an ongoing problem at your restaurant.

Wrapping Up

The type of behaviors described in this post can make up to 4% of a restaurant’s labor costs. Reducing a large amount of that waste can be as simple as running regular reports and taking advantage of all the features that your payroll or HR system has to offer.

How are you controlling labor costs at your restaurant? Let us know in the comments section below.

Chief Operating Officer at LIVELENZ. Greg began working part-time in restaurants when he was 15 and continued in the industry for a decade. He then began working for technology companies developing a passion for improving operational efficiencies at fast-growing organizations.

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