Chapter 18 Labour Cost Considerations Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Learning Objectives 18.1 Define compensation and list the principal types. 18.2 Explain direct and indirect compensation. 18.3 Explain impact on determinant of labour cost and percentage: labour turnover rate, training, labour legislation, labour contracts, use of part-time staff, outsourcing, sales volume, location, equipment, layout preparation, service, menu, hours of operation, weather, and competent management. 18.4 Explain labour costs and percentages between establishments. 18.5 Define and explain labour cost control. Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Introduction to Labour Labour is a major prime cost Costs range from 15 to 45 percent of sales Ability to deal effectively is an important requirement for food and beverage managers Discuss types of labour compensation Understanding labour cost Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Current Compensation Direct Indirect salaries wages tips or gratuities bonuses commissions Indirect paid vacations health benefits life insurance free meals free living accommodations use of recreational facilities discounts on accommodations within a chain company vehicles education child care EAP leave Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Deferred Compensation Deferred compensation is received by an employee after the conclusion of his or her period of employment. Pension benefits Health benefits All have some impact, direct or indirect, on the overall cost of labour in an establishment. Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Determinants of Total Labour Cost Total labour is affected by several considerations, some within the scope of a manager’s control All have a direct effect on the total dollar cost of labour or the cost of labour percentage, some affect both The significance of each varies from one establishment to another Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Determinants of Total Labour Cost Labour turnover rate Equipment Training Layout Labour legislation Preparation Labour contracts Service Use of part-time staff Menu Outsourcing Hours of operation Sales volume Weather Location Competent management Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

# of departing employees Labour Turnover Labour turnover rate is a ratio relating the number of departing employees to the total number of employees on the staff Labour turnover rate = # of departing employees # of employees on staff Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Use of Part-Time Staff Total labour cost for Full-time =$4,410 Wages: 7 cooks X 35 hours X $15 per hour =$3,675 Benefits: $3,675 x 20% =$ 735 Total labour cost for Full-time =$4,410 Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Use of Part-Time Staff Total labour cost for Full-time =$4,410 Wages: 7 cooks X 35 hours X $15 per hour =$3,675 Benefits: $3,675 x 20% =$ 735 Total labour cost for Full-time =$4,410 Full-time cooks Wages: 4 cooks X 35 hours X $15 per hour = $2,100 Benefits: $2,100 X 20% = $ 420 Part-time cooks Wages: 15 shifts X 7 hours X $10.25 per hour = $1,076.25 Benefits: $1,076.25 X 10% = $ 107.62 New total labour cost = $3,703.87 Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Break-even for staying open an extra hour Hours of Operation The number of hours that a restaurant operates will have a significant impact on labour cost. Break-even for staying open an extra hour = Fixed costs (1- variable rate) Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Labour Cost Control Labour cost control is to: maximize the efficiency of the labour force, consistent with standards For example: sufficient dishwashers to ensure dishes are washed efficiently, but not so many to the point where dishwashers stand around without any work sufficient servers to maintain standards of customer service, but never more than a sufficient number to serve the customers Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Key Terms Bonus, p. 465 Labour cost control, p. 479 Commission, p. 465 Labour turnover rate, p. 467 Compensation, p. 464 Minimum wage, p. 469 Deferred compensation, p. 467 Outsourcing, p. 471 Direct compensation, p. 464 Salary, p. 464 Gratuities, p. 465 Tips, p. 465 Indirect compensation, p. 465 Wages, p. 464 Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Chapter Web Links Provincial/Territorial-Employment Standards Alberta: http://www.humanservices.alberta.ca/working-in-alberta/1224.html British Columbia: www.labour.gov.bc.ca/esb/ Manitoba: www.gov.mb.ca/labour/standards/ New Brunswick: http://www2.gnb.ca/content/gnb/en/departments/post-secondary_education_training_and_labour/Labour.html Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Chapter Web Links Provincial/Territorial-Employment Standards Newfoundland: http://www.gov.nl.ca/lra/index.html Northwest Territories: http://www.ece.gov.nt.ca/advanced-education/employment-standards Nova Scotia: www.gov.ns.ca/lwd/labourstandards/ Nunavut: www.nucj.ca/LSO/#en Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Chapter Web Links Provincial/Territorial-Employment Standards Ontario: www.labour.gov.on.ca/english/es/ PEI: http://www.gov.pe.ca/labour/index.php3?number=1004723&lang=E Quebec: www.cnt.gouv.qc.ca/en Saskatchewan: www.gov.sk.ca/programs-services/labour-employment/ Yukon: http://www.gov.yk.ca/legislation/legislation/page_e.html Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

Chapter Web Links Federal-Employment Standards Human Resources and Skills Development Canada: www.hrsdc.gc.ca/eng/labour/index.shtml Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

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