Chapter 3 Section 3

1

Explain how labor costs affect cost control.

Identify factors that affect labor costs.

Explain effective scheduling can be achieved.

Labor is a semi-variable, controllable cost

Tied to sales, but not directly.

Most operations have both full-time and part-time

staff.

Operations must be aware of the fluctuations in their

sales so as to have just the right amount of staff on

hand to handle customers efficiently,

2 3.3 Chapter 3 | Cost Control

Management must ensure that payroll cost is in line with

the budgeted standard.

Ideal labor cost:

Standard used to budget for staffing needs

Represents what management predicts will happen

3 3.3 Chapter 3 | Cost Control

Business volume

Employee turnover

Quality standards

Operational standards

4 3.3 Chapter 3 | Cost Control

Business volume, or the amount of sales an operation is doing for a given time period, impacts labor costs.

Increase in sales = More hours needed ▪ Decrease in sales = Fewer hours needed

SALARIED EMPLOYEES ▪ As business volume increases, fixed labor decreases

HOURLY PAID EMPLOYEES ▪ As business volume increases, fixed labor increases

▪ Management may rely on salaried employees to take more shifts to decrease total labor costs.

5 3.3 Chapter 3 | Cost Control

Employee turnover is the number of employees hired

to fill one position in a year’s time.

Higher turnover rate = Higher the labor costs

New trainees get paid for little or no productivity while learning

Every time a new employee is hired, labor costs go up

6 3.3 Chapter 3 | Cost Control

Quality standards

Specifications of the operation with regard to products and service.

Example:

▪ Fine dining operation (compared to quick-service)

▪ Higher menu prices

▪ Higher service specifications

▪ Employee skill level needs to be higher

Additional training

Experience

Higher labor costs

7 3.3 Chapter 3 | Cost Control

A restaurant or foodservice operation must meet

operational standards.

If an employee does not prepare a product that meets the

operation’s standards, the item must be redone.

Wasted product =

Lost productivity =

Lost Money

8 3.3 Chapter 3 | Cost Control

Depends greatly on amount of revenue being brought in

AND

How much an operation is EXPECTED to bring in

Estimation of future sales

Use historical data as a baseline ▪ Adjusted based on current, local, and national trends

9 3.3 Chapter 3 | Cost Control

Master schedule

Template that shows the number of people needed in each position to run the restaurant or foodservice operation for a given time period.

Names of workers not included ▪ List only the positions and # of employees in those positions

▪ See pg. 190 in the textbook for an example

Create with the idea that a certain sales level needs to be reached ▪ Adjust the master schedule as sales change from the norm

10 3.3 Chapter 3 | Cost Control

To make the best estimates for a reasonable master schedule, consider current trends.

After determining the anticipated sales,

management determines the Payroll Dollars: Number of dollars available for payroll for a scheduling

period.

11 3.3 Chapter 3 | Cost Control

After payroll dollars are determined, managers can develop…

Crew Schedule

Contingency Plans

12 3.3 Chapter 3 | Cost Control

Crew Schedule:

A chart that shows employees’ names and the days and times they are to work.

Maintain flexibility

Consider employee satisfaction

Have clear policies, open communication, and schedules done in advance

13 3.3 Chapter 3 | Cost Control

Contingency Plan

Helps an operation remain efficient and productive even during adverse conditions.

Includes: ▪ Cross –training employees

▪ Identifying shift leaders

▪ Having on-call employees

See pg. 192-193

14 3.3 Chapter 3 | Cost Control

Operations must be aware of the fluctuations in their sales so as to have just the right amount of staff on hand to handle customers efficiently.

Four primary factors affect labor costs:

Business volume

Employee turnover

Quality standards

Operational standards

Scheduling depends greatly on how much revenue an operation is bringing in and how much revenue an operation expects to bring in.

15 3.3 Chapter 3 | Cost Control

11/10/2014 16

FACS Raider Writing Rubric

FACS Writing Guidelines