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  • 1. Controlling Foodservice Costs Controlling Labor and Other Costs Chapter 9

2. Learning Objectives After completing this chapter, you should be able to: Explain how payroll cost, FICA, Medicare, and employee benefits make up labor cost. Explain the methods used to measure labor productivity. Outline the steps involved in controlling labor costs. Describe the components and factors to consider in the development of a master schedule. Describe the methods used for managing payroll records. Explain how managers can optimize labor productivity. 3. Chapter 9 Controlling Labor and Other Costs UNDERSTANDING THE COST OF LABOR Payroll Cost 4. Chapter 9 Controlling Labor and Other Costs Benefits Costs 5. Chapter 9 Controlling Labor and Other Costs 6. Chapter 9 Controlling Labor and Other Costs THE RELATIONSHIP BETWEEN LABOR COST AND BUSINESS VOLUME 7. Chapter 9 Controlling Labor and Other Costs MEASURING LABOR PRODUCTIVITY Labor Cost Percentage 8. Chapter 9 Controlling Labor and Other Costs Guests Served per Labor Hour 9. Chapter 9 Controlling Labor and Other Costs Guests Served per Labor Dollar 10. Chapter 9 Controlling Labor and Other Costs 11. Chapter 9 Controlling Labor and Other Costs LABOR USAGE FORECASTS 12. Chapter 9 Controlling Labor and Other Costs Volume Forecasting 13. Chapter 9 Controlling Labor and Other Costs Determining the Labor Budget 14. Chapter 9 Controlling Labor and Other Costs Calculating the Number of Labor Hours Needed Creating Employee Schedules 15. Chapter 9 Controlling Labor and Other Costs Master Schedules 16. Chapter 9 Controlling Labor and Other Costs 17. Chapter 9 Controlling Labor and Other Costs Crew Schedules Validating Forecasted Labor Costs 18. Chapter 9 Controlling Labor and Other Costs MANAGING PAYROLL RECORDS Time Sheet Timecard Electronic Time Records Overtime 19. Chapter 9 Controlling Labor and Other Costs OPTIMIZING LABOR PRODUCTIVITY Training Coaching Labor Contracts Calculating Employee Turnover Rates Reducing Employee Turnover Factors Affecting Employee Turnover 20. Chapter 9 Controlling Labor and Other Costs - Summary 1. Explain how payroll cost, FICA, Medicare, and employee benefits make up labor cost. Labor cost includes payroll cost, the employers contribution to FICA and Medicare, workers compensation insurance, and employee benefits. It is also important to distinguish that payroll cost is the gross (pay before taxes are deducted), not net, total of employee paychecks. Adding payroll costs, employers FICA contribution, employers Medicare contribution, and the costs associated with employee benefits gives managers the total labor cost. 21. Chapter 9 Controlling Labor and Other Costs - Summary 2. Explain the methods used to measure labor productivity. Managers use several methods to track and measure labor productivity. The first method is to track labor cost percentage. This figure tracks the cost of labor in relations to sales. Some operations track these costs monthly, while others track payroll cost percentage on a daily or weekly basis. Managers also track indirect factors on productivity, such as performance against quality and productivity standards. 22. Chapter 9 Controlling Labor and Other Costs - Summary 3. Outline the steps involved in controlling labor costs. Managers follow five steps in controlling labor costs. First, they calculate what the labor costs should be. Then, they forecast the sales volume, or the number of expected guests. Third, they plan the number of labor hours each department will use. They use this calculation to develop an employee schedule. Finally, managers compare and evaluate actual results against the plan to determine where changes or adjustments should be made. 23. Chapter 9 Controlling Labor and Other Costs - Summary 4. Describe the components and factors to consider in the development of a master schedule. A master schedule is a template, usually a spreadsheet, showing the number of people needed in each position to run the restaurant or foodservice operation. Labor hours may be expressed as standard man-hours. The master schedule lists positions and the number of employees in those positions. To create the master schedule, the manager must forecast how many servers and other staff members will be needed to serve the expected customers. The master schedule should be divided into sections for each job department such as waitstaff, bar staff, kitchen prep, or line cooks. Having separate master schedules for the front of the house and the kitchen or back of the house helps when more than one department manager is preparing schedules. 24. Chapter 9 Controlling Labor and Other Costs - Summary 4. Describe the components and factors to consider in the development of a master schedule continued To estimate projected labor cost, multiply the number of hours scheduled for each job position times the average hourly rate for that job position. Add the results for each position to get a total cost. Actual cost will vary because not everyone makes the same hourly rate, but the numbers will provide a guideline for budgetary purposes. 25. Chapter 9 Controlling Labor and Other Costs - Summary 5. Describe the methods used for managing payroll records. Operations use one of three systems to manage payroll records. Time sheets require employees to sign in and out when their shifts begin and end. Timecards work similarly, except that each employee has a card he or she inserts into a time clock to register the start and end of shifts. Many operations now use electronic time records, which are often tied to an operations POS system or to a personal computer. Some of these systems are tied directly to payroll records. 26. Chapter 9 Controlling Labor and Other Costs - Summary 6. Explain how managers can optimize labor productivity. There are several steps managers can take to ensure high productivity. Training and coaching are often techniques that improve worker output and morale. Understanding how to work within labor contracts can also impact productivity and labor costs. Finally, reducing employee turnover is critical, and managers must understand the factors that cause employees to leave so that they can minimize the impact of these issues. 27. Chapter 9 Controlling Labor and Other Costs Key Terms: Covers per server The number of customer meals that a waitstaff member can serve in an hour. Crew schedule A chart that shows employees names and the days and times that they are to work. Employee turnover The number of employees hired to fill one position in a years time. Federal Insurance Contributions Act (FICA) A program that sets aside money for Social Security payments, which is paid for by employers and employees through payroll deductions. Fringe benefits Benefits provided by an employer that have monetary value but do not affect an employees basic wage rate, such as paid holidays or paid vacation. Labor contract An agreement between management and a union that represents the employees and that deals with wages, employee benefits, hours, and working conditions. 28. Chapter 9 Controlling Labor and Other Costs Key Terms continued: Master schedule A template, usually a spreadsheet, showing the number of people needed in each position to run the restaurant or foodservice operation. Medicare Contributions from payroll set aside for health benefits for people age 65 or older and for individuals with certain disabilities. Overtime Any hours worked by nonmanagement employees beyond 40 hours in a workweek, by law compensated at a rate of at least 1.5 times the employees regular rate of pay. Productive Producing or capable of producing an effect or result. Payroll dollars The amount of money available for payroll for a scheduling period. Productivity standard A level set by managers to measure the amount of work performed by an employee. 29. Chapter 9 Controlling Labor and Other Costs Key Terms continued: Quality standard A standard that refers to weight, count, or volume measure, such as portion sizes for menu foods and beverages, and employee production standards such as one cook per 50 covers. Sales per labor hour A number calculated by adding all the sales for a specific period (hour, day, week, etc.) and then dividing the total by the total number of labor hours used during the same time period. Standard man-hours (SMH) The number of employee work hours necessary in each job category to perform a given volume of forecasted production. 30. Chapter 9 Controlling Labor and Other Costs Chapter Images