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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. # 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

9. 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

10. 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, X 10% = $
New total labour cost = $3,703.87
Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

11. 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

12. 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

13. 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

14. Chapter Web Links Provincial/Territorial-Employment Standards
Alberta:
British Columbia:
Manitoba:
New Brunswick:
Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

15. Chapter Web Links Provincial/Territorial-Employment Standards
Newfoundland:
Northwest Territories:
Nova Scotia:
Nunavut:
Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

16. Chapter Web Links Provincial/Territorial-Employment Standards Ontario:
PEI:
Quebec:
Saskatchewan:
Yukon:
Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

17. Chapter Web Links Federal-Employment Standards
Human Resources and Skills Development Canada:
Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition

18. Copyright
Copyright © 2014 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.
Principles of Food, Beverage, and Labour Cost Controls, Second Canadian Edition