As a restaurateur, having a restaurant budget and sticking to it are key to your profitability. When you know how much is going out each month to vendors and staff, the more smoothly your restaurant will run.
Yet, no matter how much planning, restaurant overtime expenses can be unpredictable and ultimately a liability to your restaurant.
Not only can paying overtime eat into your profits, but endless hours can also have a negative impact on employee morale, as staff may end up feeling overworked, unappreciated, and unable to have a life because of unpredictable schedules.
Federal overtime laws that recently went into place help clarify what you’re responsible for as a restaurant owner, but they also have the potential of making your overtime expenses go even higher.
Without getting into a lot of legal jargon, here’s what you need to know: The change will impact any of your salaried employees who earn less than $47,500. So if your sous chef earns less than that amount, any time over 40 hours per week will qualify for time-and-a-half. (Before the law was changed, overtime was just for workers who earned less than $23,660.) Also worth noting is that overtime is based on salary alone, not the kind of role that one has. So it doesn’t matter if it’s your head server or a general manager—anything over 40 hours requires overtime pay.
Although federal law rules in this area, be aware that some states may have even stricter overtime rules. For instance, in California, overtime pay of time-and-a-half is required for anything beyond 8 hours in a given work day, 40 in a week, and for the first 8 hours on the seventh day worked in a week. And, if workers exceed 12 hours, they are entitled to double pay. In Kentucky, overtime pay extends to any employees who work 7 days in a single work week (overtime will apply on seventh day).
How Overtime Laws Affect Your Bottom Line
Now that you know the overtime rules, you have to think about the best way to manage your payroll and overtime. In other words, it’s to your benefit to give your restaurant an internal audit and review your numbers.
- How much overtime are you currently paying out?
- How much is it costing you?
- When exactly is it happening?
- Who is getting it?
Having the right restaurant analytics is essential to making an educated assessment of how to move forward and cut down on overtime expenses. With the right restaurant POS, you can easily analyze when, and how often, you are paying overtime.
Tips for Reducing Overtime
If you find that you rarely pay overtime, congratulations on your smart and effective scheduling. If your numbers are overwhelming, however, try using some of the following strategies to cut down on overtime expenses.
Need some staff management assistance? Check out our Staff Management Guide for everything you need to set your team up for success.
Hire Seasonal Employees
If you are consistently paying overtime to employees during specific busy times of the year, such as the summer or the holidays, look into hiring seasonal employees or temporary employees for busier periods. Bonus tip: If you stay in touch with those seasonal employees when they leave, they can become already-trained return employees next season.
Cross-Train Your Employees
The more skilled your employees are, the more valuable they are to you. By cross-training your employees, you are giving them a broader skill set. Employees who can handle different positions can more easily fill in as surprises arise, thus helping you avoid having to ask someone else to pull a double shift. Plus, the more your employees are skilled in different aspects of your restaurant, the more invested in it they will be, and better positioned for advancement.
Review Workload and Performance
Touch base with your employees periodically, especially if it’s a particularly busy time of year. Be sure they do not feel overworked with an unreasonable task load. You may discover that some workers feel overwhelmed because they are compensating for a coworker who is not as productive. On the other hand, other workers may be thrilled about being given more tasks or picking up a few extra hours. In that case, you might keep a few hours of overtime in your budget to motivate eager employees.
Keep a Well-Organized Schedule
With the option for online scheduling and restaurant management platforms available in the tech industry, it’s easy to manage your staff schedule more effectively. You can track hours, and make sure someone isn’t picking up too many extra shifts that put them on the overtime track.
Reexamine Your Pay Structure
Keeping your key employees to a 40-hour work week not only saves you money, but it can help improve work/life balance, which is sometimes tough to manage in the restaurant industry. If you have amazing employees who you want around as much as possible, however, it might be cost effective to just raise their salary to $47,500 or above. Just be aware that this threshold will grow every three years depending on wage growth.
Cover Costs with Subtle Price Increases
Customers may not even notice slight price increases, but if they do, be prepared to respond to their questions. Have a plan in place and discuss with your waitstaff who are on the front lines of customer service. Perhaps you can write a blog post or include an announcement in with the menu or the bill that explains that fair compensation is important to you, so you had to slightly raise some prices to help support your team.
While managing overtime costs is good business, don’t lose sight of the fact that well-compensated employees are a great investment and an asset to your restaurant. Staffers who feel supported with a fair wage will be more loyal to your restaurant, show up to work with a positive attitude, and will ultimately provide a better experience for your customers. As a result, your diners will be more inclined to return and recommend your establishment to others.