How to manage rising labor costs

From minimum wage increases to healthcare mandates and employee training and retention, labor costs can soar without proper planning. But by focusing on several key areas, operators can cut labor costs and boost profitability in the face of these changing market forces.

Manage minimum wage and healthcare regulations

As more states make moves to increase minimum wage requirements, operators’ labor costs are steadily rising. To counter this, some operators make changes such as raising menu prices or cutting employee hours, but those strategies come with their own risks.

One way to manage increasing minimum wage requirements that won’t backfire is automating administrative duties, such as scheduling and time cards. A time and attendance system can help streamline those tasks, optimizing labor costs—an employee can spend time doing hands-on work instead of spending hours planning out schedules, for instance.

Further, healthcare mandates with wider requirements, plus higher insurance costs, can be a double whammy of labor cost increases for operators. Fortunately, they too can be mitigated with programs that encourage healthy behaviors, as well as by shifting some of the cost to employees.

It’s important to note that rolling back benefit levels or plan options is an unpopular choice for operators, as it can cause employees to seek employment elsewhere.

Limiting and preventing employee turnover

Employee turnover is generally caused by two main things: employee dissatisfaction with wages and employee dissatisfaction with the number of hours they’re scheduled—two things that can change when operators struggle with labor costs. While cutting hours may seem like a good opportunity to limit labor costs, resulting turnover and the cost of retraining a new employee can exceed what those additional hours would have cost.

Operators should be mindful of employee morale and offer continual training and support to ensure employees are happy with their jobs. Flexible scheduling can also help retain employees, as scheduling inflexibility can quickly lead to a person leaving a job.

Using technology to manage labor costs and scheduling

One of the simplest ways to streamline scheduling needs and manage labor costs is to institute an automated system that tracks traffic and analyzes the number of employees needed at any given time. Workforce management technology that does the heavy lifting can be an indispensable tool for operators. Other systems that streamline all restaurant costs, including food costs and more, can help to reallocate funds for increased labor needs as well.

Beyond that, communication is highly effective—operators working closely to learn more about individual employees’ scheduling needs and preferences can not only lead to better efficiency with scheduling, but also better morale.

This post is sponsored by Kronos


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