How to spot a 20% labour cost leak
Labour costs are eating 20% more than they should. Here’s how to find the leaks—and why fixing them often breaks something else.
Labour costs are rising. Here’s where they’re hiding—and why your usual fixes won’t work this time.
Labour costs are the second-largest expense for most restaurants, after food. But unlike food, you can’t just raise prices to cover it. Customers notice when service slows, or when staffing cuts force you to turn away walk-ins. The usual advice—track hours per table, cut shifts during slow periods, or hire part-timers—only works if your problem is visible. Most leaks aren’t.
The real cost isn’t just the hours on the clock. It’s the idle time between orders, the overstaffing during dead patches, the untracked overtime when a manager “just stays late,” and the hidden inefficiencies in how you schedule. A 20% leak isn’t a single bad hire or a missed shift. It’s a dozen small things adding up—each one invisible until you measure it.
Here’s how to find them before they eat your margins.
The three places labour costs hide
1. The ‘busy but slow’ shift
Your busiest hour isn’t when the most people are in the door. It’s when the average order value drops, but the number of orders spikes. Think: lunch rushes where groups of four order three small dishes each, or weekend brunches where diners linger over coffee but don’t reorder food.
The problem? You staff for peak headcount, not peak workflow. A kitchen can handle 20 covers of two-course meals in an hour. But 40 covers ordering tapas? That’s 80 small plates, 40 drinks refills, and a pass that never clears. The result: staff stand around waiting for tickets, or rush orders so badly they get remade.
How to spot it:
- Compare orders per hour vs revenue per hour. A high order count with flat revenue means small, slow-moving tickets.
- Check ticket times during “busy” periods. If average ticket time jumps by 30% in your lunch rush, you’re overstaffed for the wrong kind of busy.
- Look at labour cost per £1,000 of sales by day part. If dine-in lunches cost 10% more than dine-in evenings (when orders are bigger), you’re bleeding efficiency.
What breaks when you fix it? Cutting staff in slow-moving rushes often means longer waits for big groups. The fix: pre-schedule “slow-busy” shifts—fewer bodies, but with cross-trained staff who can jump between front and back of house. Train servers to upsell during lulls (e.g., “While you wait for your main, can I bring a starter share?”).
2. The ‘untracked’ hours
Overtime is the easiest leak to see. But untracked time—the minutes between shifts, the “quick clean” after close, the manager who “sticks around to help”—adds up faster. A 15-minute daily delay while the last server locks up? That’s 37.5 hours a month. A manager who “just stays 30 minutes late” three nights a week? 39 extra hours a month.
The worst part? These hours aren’t in your payroll system, so they don’t show up in your labour-cost reports. They’re off-book, meaning they’re also unbudgeted—and they hit margins before you notice.
How to spot it:
- Clock-in discipline: If your system lets staff clock out early but not late, you’ll never catch the “extra 20 minutes.” Switch to a mandatory clock-out rule, or use a system that flags manual time edits.
- Shift overlap audits: Run a report comparing scheduled hours vs actual clocked hours. If the difference is consistently 10–15 minutes per shift, that’s £X,XXX a year in untracked time.
- Manager time logs: Ask managers to log non-sales tasks (training, inventory, supplier calls) separately. If “admin” time is creeping into shift hours, you’re paying for work that isn’t driving revenue.
What breaks when you fix it? Tightening clock-outs can make closing shifts feel abrupt. The fix: Build a 10-minute “wind-down” into every shift—it’s cheaper than paying for 15 minutes of untracked time. For managers, set hard caps on overtime (e.g., “No unapproved hours after 10pm”) and track their time like any other staff member.
3. The ‘hidden’ inefficiencies
Some leaks aren’t about hours at all. They’re about how work gets done—and how much of it is wasted.
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Remakes: A 5% remake rate on a £50 average ticket costs £2.50 per order. At 50 orders a day, that’s £3,750 a month—paid for by labour and food.
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Over-prepping: Making 20 portions of a dish that only sells 12? That’s 8 wasted hours of prep labour, plus the cost of the ingredients.
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Poor handoffs: A server writing down a complex order, then the kitchen mishearing it? That’s two people’s time wasted per mistake. At 10 mistakes a day, that’s £1,200 a month in labour alone.
How to spot it:
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Remake reports: Track remakes by staff member and dish. If Chef A has twice the remakes of Chef B, it’s a skill gap—or a communication problem.
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Prep vs sales: Compare prepped portions to actual sales. If you prep 30 burgers but only sell 22, you’re overstaffing prep for no reason.
If 30% have issues, your handoffs are costing you £X per hour in wasted labour.
What breaks when you fix it? Cutting remakes by tightening prep standards can slow down service—if you’re not careful. The fix: Standardise recipes (e.g., “All burgers are assembled at the pass”) and train staff on the most error-prone dishes first.
The report you’re not running (and why it matters)
Most restaurant systems let you see labour cost as a percentage of sales. But that’s backward-looking—it tells you how much you’re overspending, not where.
What you need is a labour contribution report:
| Metric | What It Shows | How to Fix It |
|---|---|---|
| Labour cost per £1k sales | Which day parts are most inefficient | Cut shifts in slow-moving periods |
| Orders per labour hour | Are you overstaffed for small orders? | Cross-train staff for multi-tasking |
| Remakes per staff member | Who’s causing the most waste? | Retrain or reassign problematic staff |
| Untracked time per shift | How much “extra” time is slipping through? | Enforce clock-outs and shift caps |
Why this works:
- It ties labour to revenue, not just hours.
- It spots leaks before they hit the P&L. A 10% drop in orders per labour hour? That’s a 20% efficiency hit—before you even look at the numbers.
- It shows you where to cut without hurting service. If lunch rushes are slow because of small orders, the fix isn’t fewer staff—it’s higher-margin menu items or faster service training.
The trade-off you’re missing
Every time you cut labour costs, something else gets worse. Here’s what happens when you fix the leaks—and how to stop the damage:
Problem: Cutting shifts saves money—but slows service.
Fix:
- Pre-schedule “slow-busy” shifts with cross-trained staff who can jump between front and back of house.
- Train servers to upsell during lulls (e.g., “While you wait, can I bring a starter share?”).
- Offer a “quick service” menu for walk-ins during slow periods (e.g., “Under 15 minutes” items).
Problem: Tightening clock-outs makes closing feel rushed.
Fix:
- Build a 10-minute “wind-down” into every shift—it’s cheaper than paying for untracked time.
- Assign one staff member per close to handle only end-of-shift tasks (e.g., “You’re the closer—your job is done at 10:10pm”).
Problem: Reducing remakes improves margins—but slows the kitchen.
Fix:
- Standardise recipes (e.g., “All burgers are assembled at the pass” to reduce errors).
- Train staff on the most error-prone dishes first.
- Use a kitchen display system to flag complex orders before they’re misheard.
What to do next
- Run the three reports above—labour cost per £1k sales, orders per labour hour, and remake rates by staff.
- Pick one leak to fix first. Start with the biggest number, not the easiest one.
- Test the fix for two weeks, then check if the trade-off (slower service, unhappy staff, etc.) is worse than the leak.
- Adjust. If cutting shifts slows service too much, try upselling instead. If remakes drop but kitchen speed suffers, retrain.
Labour leaks don’t fix themselves. But they do get worse if you ignore them. The restaurants that survive the next few years aren’t the ones with the lowest payroll—they’re the ones that measure the right things and fix the leaks before they sink margins.
How do I know if my labour costs are too high?
Compare your labour cost per £1,000 of sales to your busiest and slowest day parts. If dine-in lunches cost 15% more than dine-in evenings (when orders are bigger), you’re overstaffing for the wrong kind of busy. Use a report that breaks down labour cost by hour of day—not just by shift.
What’s the fastest way to cut labour costs without hurting service?
Focus on untracked time first—those 15-minute delays after shifts add up to thousands a year. Then tackle slow-moving rushes by cross-training staff to handle both front and back of house. Avoid cutting shifts in busy periods; instead, optimise menu items for faster service (e.g., smaller plates, quicker prep).
How do I stop managers from working unpaid overtime?
Enforce mandatory clock-outs and set hard caps on overtime (e.g., “No unapproved hours after 10pm”). Track their time like any other staff member, and reward managers who stick to schedules—not those who “just stay late.” If they’re consistently over, it’s a scheduling problem, not a willingness one.
What’s the biggest mistake restaurants make when cutting labour?
They cut hours uniformly—same number of staff, just fewer shifts—without checking if the problem is overstaffing for small orders or inefficient workflows. The fix isn’t fewer bodies; it’s better workflows. For example, if lunch rushes are slow because of tapas orders, train staff to group small plates into “shares” to speed up service.
How do I know if my kitchen is overstaffed?
Track orders per labour hour. If your kitchen handles 12 orders per labour hour during lunch (when orders are small) but 20 orders per labour hour in the evening (when orders are bigger), you’re overstaffed for lunch. The fix: Adjust staffing by day part, not just by headcount.
Start with the report that shows you labour cost per £1,000 of sales by hour—it’ll tell you exactly where to look.
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