Chapter 18 Labor Cost Considerations

1. Chapter 18Labor Cost Considerations Principles of Food, Beverage, and Labor Cost Controls, Ninth Edition

2. Current Compensation • Direct: salaries, wages, tips, bonuses, commissions • Indirect: paid vacations, health benefits, life insurance, free meals, free living accommodations, use of employer-operated recreational facilities, discounts on accommodations at other properties within a chain

3. Deferred Compensation • Pension benefits • Social Security

4. Determinants of Total Labor Cost • Equipment • Layout • Preparation • Service • Menu • Hours of operation • Weather • Competent management • Labor turnover rate • Training • Labor legislation • Labor contracts • Use of part-time staff • Outsourcing • Sales volume • Location

5. Chapter Formulas Labor turnover rate = Number of departing employees ÷ Total number of employees on staff Break-even for staying open an additional hour = Fixed costs ÷ (1 – Variable rate)

6. Wages: 4 dishwashers × 35 hours × $7 per hour = $980 Benefits: $980 × 20% = $196 Total labor cost: $1,176 Saving Money by Using Part-Time Staff With all full-time staff

7. Wages: Wages: 2 dishwashers × 35 hours × $7 per hour = $490 10 shifts × 7 hours × $4.50 per hour = $315 Benefits: $315 × 10% = $31.50 Benefits: $490 × 20% = $98 Total labor cost: $934.50 Saving Money by Using Part-Time Staff With full-time and part-time staff Full-time dishwashers Part-time dishwashers © John Wiley & Sons, Inc. 2009