Labor Cost Control with Limited Staff Essay

Labor Cost Control with Limited Staff Essay

A food service manager generally has a variety of responsibilities in a food and beverage facility and subsequent cost control to ensure delivery in such businesses. This calls for sound expertise in this area because the manager mostly takes care of scores of duties: from management of food production to service and the final sales all in a single stride. Quality of performance is normally judged in terms of good service delivery and quality production: this explains why the food service manager must also manage properly the cost controls of the concern in order to ensure success. One such sensitive area which if not well managed then the business may under perform is the management and control of revenues and expenses. This is because one sole objective of operating a business in the food and beverage industry (or any other business) is to maximize profits while at the same time giving consumers the best value for their money and satisfaction.

It is normally important to do a cost-benefit analysis in doing any type of business: it would not be viable to reduce costs to a level where the business runs at continuous losses. For food products, when the customers are few, costs are less and this by extension means that the profit margin is low; cost reduction at the expense of consideration of the balance between cost management and good service delivery to consumers is suicidal to the business. In any food service facility, the operation is such that the expenses (whether major or miscellaneous) deducted from the total revenues generated equals to profit. In understanding cost control, it is important to know and understand all the costs incurred in the course of operation: Food costs are those that are generally associated or that directly go into the production of food in the facility, these costs also include miscellaneous costs incurred such as the costs of plastic materials and paper wrappers, these costs (normally make the bulk of all the expense incurred and must therefore be properly managed).

Beverage costs are such as milk, coffee and tea but could also include other beverages, some facilities even include alcoholic drinks (like wine and beer) in the costs while others only reflect the drinks that are not alcoholic in nature. Beverage costs could be part of food costs and also include minor costs of the ingredients used in the production of such drinks. Labor costs are the overall costs incurred to pay and to maintain the employees of the facility: in case the employees are on the payroll and the facility is not tax exempt, the costs due to taxes paid are also included in the employee labor costs. Some of these concerns could choose to separate the labor costs of normal employees with those of the managements, in such a case, the management costs (including their salaries and maintenance costs) are made part of the other costs/expenses. Normally if the two expenses are not separated (are put together), then they will definitely exceed that of the food costs (.Dopson, L.R, Hayes, D.K. 2007, pp 1-9).

Other expenses or as erroneously normally referred to as miscellaneous are very crucial such that if not properly managed in the food service facility, then the success of the business may not be realized. These include fees and the rent of the premise, the general utensils in the facility and any other expense not part of either the food and beverage costs or the labor costs. Generally, a manager of the facility must learn how to manage and control costs while at the same time ensuring that profits are made and the customers are satisfied: customer satisfaction, increase in their numbers and increase in revenue are factors that are directly proportional, that is, guests keep coming to a facility if there is quality service and this in turn this increases sales volumes. This whole equation and the underlying issues can be explained by the use of percentages, here the profits obtained and the expense incurred is considered.

In the food and beverage industry, evaluation and control of the costs of labor is very challenging since consumers of these products normally just compare the costs of eating home verses eating away from home and this means the labor costs are never taken into consideration by those who use these services. A food service manager must therefore put equal weight to management of food and beverage costs as much as managing labor costs; in labor cost control, there are two important factors to consider; time taken and rate of pay. These determinants are dependent on the term of service of an employee and are also regulated by policies of the governing authorities like the trade unions. The time taken by an employee also majorly depends on the employee’s terms of employment such as if they are on a full time employment, part time or are providers of seasonal labor (Jones.P, Merricks, P. 1994. pp 120-126).

A time card is normally used to monitor the employee time management at work, this is further used to calculate the employee costs say on a weekly basis and this may include certain costs that are due. Allocation of costs can be done on the grounds of factors such as the time taken and the rate of pay, these factors are more in control of the management and therefore should pose no challenge in the cost allocation exercise, further, this will help in general reduction of costs. A sound labor cost control system ensures that costs are reported on a regular basis and as per the job category; this takes into account the normal hours that an employee has worked, the overtime hours worked if any, the leaves say when an employee is sick or not present at work and the holiday when no work was done at all.

In using percentages, most facilities normally assume that-on a weekly basis-should the costs of labor be as expected (did not exceed the maximum limit), then the control procedures are deemed effective, this is not necessarily reliable because it is not an obvious pointer to productivity. Another yardstick against which labor costs are measured is the revenue targeted in value as compared to the costs of employees incurred in the period in question. However, this comparative factor best suits facilities where labor does not vary in structure from time to time. Other important factors of comparison are the number of hours worked by an employee and whether this meets the target and the how the managers have controlled the performance. Managers in a food service facility should ensure that the employees’ time is used to the maximum and that the labor costs are properly managed and controlled by the use of analytical techniques to establish why the performance is no as expected(in case it is not). The Standard System of Catering Accounting (SSCA) has principle guidelines of labor cost allocation and control, it works on the principle of treating the kitchen as a cost center (Dittmer, P.J, Keefe, D. 2005.pp 74-79).

The use of computers in cost control has been easier, more effective and less tedious as compared to the manual systems that were less reliable and were time consuming to prepare. The advent of bar-code readers is efficient in terms of sales receipting, preparation of bills and general stock valuation and payroll systems. In line with labor cost control, it is very important to prepare budgets to act as a corrective measure in case the costs are to be exceeded or to correct any form of variation from what is in the budget. This helps the management to remain within the target to ensure the revenue expectation is met or an anomaly is corrected and this is only achieved by investigating the cause of the problem that in turn caused a variation from the budget figures. The corrective actions are due to variations of the set policies or labor cost variances: such pointers (of variances) often necessitate the separation of duties among different managers so that each takes care and is responsible for their actions and in turn control is done at the company level and not at departmental level (Kotas, R. 1999. pp 102-103).

Overall, cost control is an important aspect of a food service entity because it is a yardstick against which sound performance is measured, against this background therefore, the food service management need to ensure that good decisions are made regarding cost allocation techniques and delegation of duties relating to cost controls are wisely done. Labor cost control is one area that can not easily be achieved with satisfactory perfection; this explains why the management needs to divert a lot of efforts to this area. Notably though, most facilities in the entire food and beverage industry have not adopted standards in the application of the labor cost control policies. Labor cost control policies normally should change with changes in organizational systems over time, if such changes are not effected, then the systems in operation and the labor cost control policies may not be compatible (Davis,B,Stone,S 1998 .pp 311-312).


Davis, B, Stone, S (1998).Food and beverage management .Butterworth-Heinemann.

Dittmer, P.J, Keefe, D. (2005).Principles of food, beverage, and labor cost controls, John Wiley and


Dopson, L.R, Hayes, D.K. (2007).Food and Beverage Cost Control .John Wiley and Sons.

Jones.P, Merricks, P. (1994).The management of food service operations. Cengage Learning EMEA.

Kotas, R. (1999).Management accounting for hospitality and tourism .Cengage Learning EMEA.

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