Restaurant Payroll Costs – Tips on How You Can Reduce Them This 2022

February 23, 2022 / Category: New York Payroll Management , Payroll Management

Some of the significant expenses that any restaurant business incurs include point-of-sale (POS) system, equipment, and inventory costs. Additionally, the human resource factor remains at the heart of the hospitality sector, and labor costs account for much of the expenses that restaurants incur. Over 27,000 restaurants were operating in New York just before indoor dining was shut down in March 2020. At the moment, restaurants are striving to boost revenue and reduce operating expenses, and restaurant owners can achieve the latter by cutting restaurant payroll costs. 

However, reducing restaurant payroll expenses if you own one in New York is not so straightforward. It is also interesting to discover that the percentage of restaurant labor costs to sales averages at 22%-40% and can be as high as 75% in some cases. When you add that to the industry’s capital-intensive nature, the cost of running your restaurant can go through the roof if you do not act accordingly. 

Finding ways to reduce restaurant payroll expenses is paramount even as labor costs rise, and that is where Premier Payroll Solutions comes in handy. Managers can cut workers or hours, but that will reduce the number of resources and individuals that remain at your disposal as a restaurant operator. That, in turn, will make scaling your output challenging.

Below are a few tips on how you can lower your restaurant’s payroll costs.

 Restaurant owners in their business working on strategies to automate work functions as a way to reduce restaurant payroll costs.

Tips on How to Reduce Restaurant Payroll Costs This 2022


1. Work the Numbers

If you want to manage something better, you need to measure it, and if you know the numbers and keep up with them, making more informed decisions will not be a problem. Here are some of the formulas you can use in this case.

  • Prime Cost Percentage (Food + labor relative to sales) = Prime Cost / Total Sales
  • Labor Cost = Sick and vacation days + salaried wages + healthcare + hourly wages + payroll taxes + bonuses + overtime + any other “labor-related” expenses
  • Restaurant Payroll Percentage (Labor costs relative to sales) = Total Payroll Costs / Total Revenue
  • Labor Costs Per Hour = (Hours Worked in each pay group (cook, front, back, line, etc.) x Total Workers) / Weeks Per Year.

Note that these percentages will vary by industry. Even so, what matters is that you are tracking the figures monthly to identify trends.


2. Keep the Revolving Door Shut

The attrition rate within the restaurant industry is pretty high. As such, you should focus on incentivizing your best workers to stick around instead of worrying about hiring and training expenses. In theory, boosting retention is easy, and the reason is that you only need to prove to your employees that the benefits of staying outweigh the options available out there. 

Although money is always a prominent factor, it is not the only one. Recognition and mutual respect at work are the other aspects worth considering. For example, most workers may be willing to take a lesser-paying job if an employer treats them with compassion and kindness offers flexible scheduling and mentoring.

Exit interviews are the fastest way to close the revolving door of your restaurant. So, ask workers why they are leaving and what will encourage them to stay to improve your retention strategy.


3. Prioritize Time Management

Reducing your restaurant payroll expenses significantly over time is possible by cultivating an environment of personal punctuality and accountability. Great things happen when your workers take pride in what they do and arrive at the workplace on time.

Technology makes it easy for employees to do the right thing. Consider acquiring a GPS time clock tool to see who has clocked in and at what location. Blocking early time punches to prevent them from adding up is also possible in this case.


4. Avoid Settling and Hire Thoughtfully

You can improve your workers’ efficiency, avoid unnecessary attrition, and reduce training costs by hiring the right candidate. A thoughtful Hiring process makes all that achievable through cross-interviews with other managers and your staff to ensure the candidate you select is a good culture fit. Asking better restaurant interview questions is part and parcel of hiring thoughtfully.

It would help if you kept interviewing even when your staff is at 100% strength since some individuals will quit with little to no notice. That way, you will always have ideal candidates waiting to hop on board.

Male restaurant owner having a meeting with his staff and discussing incentives as a strategy to reduce restaurant payroll costs.

5. Review Your Menu Carefully

Sometimes, cost cuts can add up significantly when you make a few sacrifices or ask the tough questions below.

  • Will expanding your to-go offering while keeping labor expenses relatively steady bear a positive impact on your sales? Note that online ordering requires less training and attracts lower overhead and labor costs.
  • Is your weekend brunch delivering according to your expectations? From a labor and food cost perspective, you need to evaluate each menu and shift to ensure a revenue driver.
  • Are there some dishes in your menu that require unnecessarily long prep time? Removing such dishes can make your employees more efficient.


6. Provide Cross-Training Opportunities

Although inevitable, external attrition is avoidable to some extent. Cross-training can keep your restaurant’s internal knowledge from walking out the door if critical workers leave. In that case, you need to create a structured cross-training process for all employees if you want them to cover each other and train new hires. 


7. Automate as Many Functions as Possible

Instead of obsessing over employee scheduling, consider investing in restaurant scheduling software. By doing so, you can create scheduling templates while your workers manage their shift cover and schedule swap requests. Also, outsourcing deep cleaning and laundry services allows your employees to spend more time on what they do best



Cutting hours can help you reduce restaurant payroll costs. However, it is not the best option. It may be better  to invest in proper accounting, training, and scheduling software. Premier Payroll Solutions is a resource you cannot afford to overlook as a restaurant operator within New York seeking ways to manage payroll better.

You can get a free quote from your local NY restaurant payroll provider by contacting us today!