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.
• 18.3 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
• 18.2 Explain direct and indirect compensation.
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Introduction to Labour
• Labour is a major prime cost
• 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
• Costs range from 15 to 45 percent of sales
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Current Compensation
• salaries
• wages
• tips or gratuities
• bonuses
• commissions
• Indirect
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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
• Direct
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Deferred Compensation
• Deferred compensation is received by an employee
• 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
after the conclusion of his or her period of employment.
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Determinants of Total Labour Cost
• Total labour is affected by several considerations, some
• 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
within the scope of a manager’s control
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• 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
Determinants of Total Labour Cost
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Labour Turnover
Labour turnover rate
=
# of departing employees
# of employees on staff
Principles of Food, Beverage,
and Labour Cost Controls,
Second Canadian Edition
• Labour turnover rate is a ratio relating the number of
departing employees to the total number of employees on
the staff
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• Wages: 7 cooks X 35 hours X $15 per hour
• Benefits: $3,675 x 20%
=$3,675
=$ 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
9
• Wages: 7 cooks X 35 hours X $15 per hour
• Benefits: $3,675 x 20%
=$3,675
=$ 735
• Total labour cost for Full-time
=$4,410
• Full-time cooks
• Wages: 4 cooks X 35 hours X $15 per hour
• Benefits: $2,100 X 20%
= $2,100
= $ 420
• Part-time cooks
• Wages: 15 shifts X 7 hours X $10.25 per hour
• Benefits: $1,076.25 X 10%
= $1,076.25
= $ 107.62
• New total labour cost
= $3,703.87
Principles of Food, Beverage,
and Labour Cost Controls,
Second Canadian Edition
Use of Part-Time Staff
10
Hours of Operation
Break-even for staying open
an extra hour
=
Fixed costs
(1- variable rate)
Principles of Food, Beverage,
and Labour Cost Controls,
Second Canadian Edition
• The number of hours that a restaurant operates will have a
significant impact on labour cost.
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Labour Cost Control
Labour cost control is to:
• 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
• maximize the efficiency of the labour force, consistent
with standards
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Bonus, p. 465
Commission, p. 465
Compensation, p. 464
Deferred compensation, p. 467
Direct compensation, p. 464
Gratuities, p. 465
Indirect compensation, p. 465
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Labour cost control, p. 479
Labour turnover rate, p. 467
Minimum wage, p. 469
Outsourcing, p. 471
Salary, p. 464
Tips, p. 465
Wages, p. 464
Principles of Food, Beverage,
and Labour Cost Controls,
Second Canadian Edition
Key Terms
13
Chapter Web Links
• Alberta: http://www.humanservices.alberta.ca/working-inalberta/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/postsecondary_education_training_and_labour/Labour.html
Principles of Food, Beverage,
and Labour Cost Controls,
Second Canadian Edition
Provincial/Territorial-Employment Standards
14
Chapter Web Links
• Newfoundland: http://www.gov.nl.ca/lra/index.html
• Northwest Territories: http://www.ece.gov.nt.ca/advancededucation/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
Provincial/Territorial-Employment Standards
15
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
16
Chapter Web Links
Federal-Employment Standards
Principles of Food, Beverage,
and Labour Cost Controls,
Second Canadian Edition
• Human Resources and Skills Development Canada:
www.hrsdc.gc.ca/eng/labour/index.shtml
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Principles of Food, Beverage,
and Labour Cost Controls,
Second Canadian Edition
Copyright
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