Am I paying my employees too much for the work being done?

I was wondering if there is a “standard” formula for calculating the maximum amount of money spent on payroll. I have a few good employees, yet I always seem to feel that I am overpaying them considering the amount of money the pizzeria brings in versus the work they actually have to do.

Re: Am I paying my employees too much for the work being don

What is your percentage of payroll to sales?

Re: Am I paying my employees too much for the work being don

sure, what percentage of your sales/revenue do you spend on labor? a good round about figure is somewhere around 16 to 18 percent. Anything more and your labor is too high.

Re: Am I paying my employees too much for the work being don

My target is 23% - total labor, mgt etc… No way I can imagine running@ 16%. Is that your total labor??

Re: Am I paying my employees too much for the work being don

on some nights when we are busy we run as low as 8 percent. But Manager salaries are not figured into the labor percentage mix until the end of the pay period.

Re: Am I paying my employees too much for the work being don

It honestly depends on a number of things. You have to take into account your margins and overall sales volume. If you sell higher mark-up items (say gourmet pizzas) and they take more involved and skilled prep work, it is not unusual to have higher labor costs because talented cooks should be payed better to do what they do if it helps your business. That said, 15-20 percent of total sales is a decent target for labor costs. These suggestions come from a mix of my restaurant industry experience and business degree so take them how you will.

Re: Am I paying my employees too much for the work being don

i read on here that it should be around 23% if there is no Manager… i.e. you are working for free.
and 30-35% if there IS a manager, and you are not there.

we usually sit at 28-33% when we are not there, but it’s been slow for the past few weekd and labor has been hitting upwards of 45% YIKES!

Re: Am I paying my employees too much for the work being don

We re-opened our pizzeria on Feb.28 of this year and we are projecting to gross around 650k. Our staff consists of two good waitresses and three back ups who quite frankly don’t deserve to even be metioned…in this part of Boca Raton, it seems as though nobody actually needs to worry about money. Our kitchen staff consists of me and my brother/partner, along with one other kid that seems to have taken a real interest in the business. THANK GOD FOR HIM!! As for delivery drivers, we now have four teenagers that work a couple of nights each. To be totally honest, I’ve basically accepted the fact that if our business is going to make it, I’m basically going to have to work hundred hour weeks until I(we) get fed up and decide to sell… If there is any advice you can offer, it would really help!!

Re: Am I paying my employees too much for the work being don

$650K?? I’d be rolling in dough with that much gross!!! Congratz!!!

Re: Am I paying my employees too much for the work being don

If your grossing 650K, Your payroll should be around 162K. Thats 25%. Depending on your market, it may be higher or lower. If you have investors/partners, you not gunna make the money your gunna want.

Focus on growing sales. There is always time to boxtop, throw menus & Doorhangers.

Maybe your foodcost is out of whack?

Re: Am I paying my employees too much for the work being don

We use our POS to track labor, there is a “dashboard” feature which is handy. We run 16-17% on net sales on average. When it slows down for the night I keep my eye on that dashboard, as soon as it nears 16% the ax comes out, have a good night thank you for a great shift! I recently went to a Sysco show, which now are marketing seminars more than a food show. I knew with insurance, social security and so on it costs me about 14$ an hour to pay someone 10$ an hour. They just confirmed that. So I track my labor at 16% on net sales so my target 20% is included with all the extra stuff. I run a 27-30% food cost so I can generally project around 40% of net sales to pay my bills and maybe take some home myself :wink:

Re: Am I paying my employees too much for the work being don

I could not have said it better my self.

You never never want to have less than 40% of gross to pay bills and your self.

Re: Am I paying my employees too much for the work being don

Our labor runs about 30%. I do not work there. If I took the manager’s paycheck out of the calculation, labor would run about 24%. Wages are high where we are, but so are pizza prices. If we had lower prices, we would need to sell more pies to do the numbers and even if wages were lower we would end up spending just as much because we would need more staff to make more pies.

Unless you are selling $40 pizza, I don’t think you can do 650K with the staff you describe. That is basically 2K per night which means your big nights are going to be 4K. Doing 4K will require 5 in kitchen at least.

Re: Am I paying my employees too much for the work being don

This is where the stress comes in. It can be done, and it has been for quite some time - but at a high cost. When things started to really take off a few years ago, I went from working 55-65 hrs a week to over 100 hrs a week…actually working the place 7 days a week for a little over two years straight. I started out at 187 lbs. and ended up at 145 before I knew it. As for numbers, we do a lot of $100+ tickets, mostly from the higher end sub divisions in our area. As for the kitchen/drivers, they are all cross-trained as best as possible, making things a bit easier for us when the pressure is on.

Re: Am I paying my employees too much for the work being don

We re-opened our pizzeria on Feb.28 of this year and we are projecting to gross around 650k. Our staff consists of two good waitresses and three back ups who quite frankly don’t deserve to even be metioned…in this part of Boca Raton, it seems as though nobody actually needs to worry about money. Our kitchen staff consists of me and my brother/partner, along with one other kid that seems to have taken a real interest in the business. THANK GOD FOR HIM!! As for delivery drivers, we now have four teenagers that work a couple of nights each. To be totally honest, I’ve basically accepted the fact that if our business is going to make it, I’m basically going to have to work hundred hour weeks until I(we) get fed up and decide to sell… If there is any advice you can offer, it would really help!!

Prooney, parts of your post don’t make much sense ->

[size=5] “projecting to gross around 650k” To be totally honest, I’ve basically accepted the fact that if our business is going to make it, I’m basically going to have to work hundred hour weeks until I(we) get fed up and decide to sell.[/size]

On one hand you’re projecting a sales # that would make alot of pmq ops drool, myself included. Then you’re saying you have to work yourself to the bones to make it… or sell…

You should ask Nick what his profit % would with 650K sales… With or without a manager.

My store would be HUGELY successful @ 650K sales.

Re: Am I paying my employees too much for the work being don

I am very familiar with the numbers.

At 650K my business makes about 110K AFTER I pay a manager 50K. That is about where we were in 2007-2008. If I worked there full time (45-50) hours I would be making 160K. (I come in weekly and pay the bill but I do not work shifts, manager hires, fires, trains, buys food does payroll.)

Re: Am I paying my employees too much for the work being don

We’ve gone over our sales repeatedly since were-opened in February. The 650k was actually supposed to be 550k…sorry. Still, the pizzeria was closed for a four month period due to a financial battle between my former step-father and myself…he had a few accounts opened in my name and was taking out loans against the business, forging my signature…the list goes on. Tough lesson learned, an one of the hardest aspects is getting the lazy sheriff’s office to help-but that’s another story. Prior to the four month closing, we were already at just over 400k, and if it was to follow the same sales pattern as the past few years(season included), 550k was absolutely in sight and then some. Since we have re-opened, our overall sales are up between 10 and 15% from last year.

Re: Am I paying my employees too much for the work being don

16% ???

Wow…Never have reached that in 17 years.

The bottom line is that you need to look at your business in blocks. Your rent may be 4000 and mine is 2000. Your retail price for a pizza may be able to get 18% more than mine based on area. Your menu may be limited but your customer base is hugh based on your location etc. thus only needing a limited anount of payroll etc…

At the end of the week (I always use P&L for the week) you need to be ahead. Yes, one week will be a negative and the next a positive, this way you can see exactly where you are at ( the only true method of calculation in this business)

If your payroll is 50% and you dont have to be there and still make money, Great!

I once had a shop that did 8,000 week and the rent was (including water and sewage) 450… you do the math

Re: Am I paying my employees too much for the work being don

My biggest problem now, as always, seems to be getting employees to put out the same quality of food that I demand when I am there(not to mention simply being capable of keeping up with the busy periods). It seems as though they can usually get through the rush, but after they simply shut down…is it really that hard to work hard for 3-4 hrs. and then clean up? any methods I have not thought of yet? thanks.

Re: Am I paying my employees too much for the work being don

After doing this for 30+ years I always try to give employees a sense of ownership. I know when I was on the other side of the payroll I felt more loyal when I thought what I was doing was actually for the betterment of the business. I think there is a hundred different ways to create a sense of ownership either through cap oriented bonuses (After a certain amount of sales, your manager receives a percentage of the sales after the goal has been achieved) and so on. You have to model your bonuses or reward structure based on your business model. I think the trick is to empower your managers just enough that they feel what they do actually makes a difference not only in how successful your place is, but also reflects the amount of money and I’ll say it, and “power” they are given. I also believe working side by side during the stressful rush times gives all your employees the sense that what your doing as a team effects not only what I make, but what the team makes as a whole. " Man, if this keeps up, I think we can take that trip down to the casino I was talking about." “OK Joe, I got the hot table, can you watch the front while we finish up back here?” It may be as simple as giving your key employee the alarm code, again it’s all what works for you. The main thing is this, there is a reason your employee is working in a pizza shop and not in a corporate office or in the medical field. I try to always make them feel needed and important. " You know what Joe? There is no way in H$ll I could ever do this without you man, thanks for doing a good job."

                                                                                                                              Willi