Labor Plan Best Practices – Hotel Effectiveness

Table of Contents

F&B Positions Need Detailed and Variable Labor Standards
Choosing the Right Labor Plan for F&B Positions
Choose the Right Variables for Your Plans
Best Practices for Excluding Positions or Earning Codes from Labor Management Reporting
- When to exclude items from labor management reporting
- How to exclude (or include) hours and wages
- Reports that show excluded hours and wages

F&B Positions Need Detailed and Variable Labor Standards

Food & Beverage labor standards can be complex because there are so many options for how to set them up. Full service hotels can have a huge portion of their labor costs devoted to F&B, so it's very important that these areas have detailed labor standards for every position.

We often see hotels that have very well thought out labor standards for their rooms' positions, but have standards for their F&B positions that are much less detailed and variable. A good example is found when we look at the labor plans for banquet positions. A surprising number of hotels have banquet positions that have fixed labor plans. This almost never makes any sense.

Banquets by their nature are highly variable. When the hotel does not have banquets, the hotel will look really good and show a labor cost 'Win.' When the hotel does have banquet business, the hotel will look like it's over-spending on labor. This forces your managers to explain a labor 'Loss' even though they may have booked a really profitable piece of additional business. Just as importantly, the managers responsible for the banquets have none of the guidance of how they should be staffing this area since there are no defined labor standards.

Choosing the Right Labor Plan for F&B Positions

Hotel Effectiveness allows you to build labor standards for F&B positions with virtually unlimited amounts of flexibility. We highly recommend you take advantage of this flexibility. Below are some tips on getting started building the best F&B labor standards for your hotels.

Choose which types of plans you will use:

Fixed Plans – These plans build the same hours regardless of how busy your property is. Fixed plans are often the right answer for F&B managers. Fixed plans are also the right answer for positions where you will never ever staff any additional hours for increases in volume but where you absolutely have to cover a certain number of hours every day. A good example might be a bar or lounge in a smaller hotel where you always need to cover the hours of operation for the bar, but you will never staff more than one bartender.
Occupancy Based Plans – These plans will build hours based on your hotel's occupancy or number of rooms sold. These plans are correct for F&B positions that only serve your in-house guests (i.e. they do not ever serve local guests or banquets) and where you have a predictable pick-up rate of how many guests will use your F&B outlets. For many F&B positions, occupancy based plans work very effectively and are an excellent choice. The biggest drawback is if a hotel frequently books groups who will be organizing their own F&B either inside or outside of the hotel. This can lead to a situation where the hotel over-staffs F&B positions because they are running a high occupancy but there is only a limited amount of F&B business because a group has organized separate F&B arrangements for their members.
Cover Based Plans – Covers (or number of guests served) in an outlet or area of the hotel are usually the most accurate way of estimating workload for a position. In any higher volume F&B operation, covers are almost always the best method of matching staffing levels with the business requirements. In a more complex F&B environment, covers may need to be broken down into several different types. For example, a hotel that does banquets & catering may find that the number of banquet covers may be irrelevant. This is because the effort required to serve 100 guests who are having a formal sit down dinner is totally different from a 100 guests who are having a coffee break. Because of this, it is often important to track covers in more detail and build different standards for each type of cover. Unfortunately, it can get to be too complex to track every type of cover. Furthermore, many hotels do not track number of covers in a consistent manner. All things considered, in a higher volume F&B operation, covers are probably the best choice for using to build your labor standards.
Revenue Based Plans – Labor plans based on revenue are often a really great compromise for hotels that have peaks and valleys in their F&B volumes. Another advantage of revenue based labor plans is that they will help ensure the managers hit profit margin targets for their areas. The key to revenue based labor plans is to have clear labor budgets for every area of your F&B department and then break that down into how much you can afford to spend per position. For example, you will normally expect a very low labor cost percentage for positions in your lounge or bar while you may expect much higher percentages for positions in a formal restaurant.

For a revenue based plan to calculate correctly, you'll also need to know the average wage for each position, so the system can back into how many hours you should be staffing for each position. We find that revenue based plans are particularly effective for banquet and catering positions and can help ensure that this business is staffed profitably.

Just as Important—Choose the Right Variables for Your Plans

Once you choose the type of plan, you will need to break it down into the specific variables on which you want to base the plan. If you choose to use plans based on covers or revenue, we suggest you are as specific as you practically can be in tracking each area. Remember, you can load virtually an unlimited number of variables to build into your plans. Each of these variables can be forecasted when you are creating schedules in the Hotel Effectiveness' Scheduler and your night auditor can enter the actuals to make sure your plan hours are calculated correctly.

Best Practices for Excluding Positions or Earnings Codes from Labor Management Reporting

Excluded wages and hours are labor costs and hours that are not included in the any of the labor reporting. Because these items are excluded, they do not count against the hotel in the calculations to show if the hotel 'won'' or 'lost.'

I. When to exclude items from labor management reporting

There are a couple of common situations where a hotel might want to exclude certain hours and wages:

Excluding hours and wages associated with a specific position
- Some hotels have positions paid out the hotel that are not directly related to the operations of that hotel. For example, there might be an owner, corporate staff member, or other individual who is paid out of a hotel. While technically such a position is part of the hotel's payroll, it really is more of an accounting or cash flow allocation rather than a real operating cost of that hotel.
- An easy way around this is to exclude any hours and wages associated with that position from the labor management reporting. The hours and wages could still show up in payroll and time & attendance but they would not show up on the other labor cost reports.
Excluding hours and wages associated with an earning code
- Similarly, some hotels have earnings codes (types of earnings) that they do not want to include in the labor cost reporting. A common example is vacation pay. While this is directly related to the cost of operating the hotel, these hours are often hard to include in labor plan standards because the timing of when the vacation will occur is not certain. A hotel may look really good if there is no vacation but then look way over if even a couple of team members take a vacation.
- Often types of non-work benefit hours like sick or vacation or jury duty are excluded from the labor management reporting.
- If a hotel has tipped employees, the cash tips, credit tips, and banquet service charges are also usually excluded from the labor management reports.

The bottom line goal of excluding certain hours and wages from reporting is to have a fair measurement of how well the hotel is doing in managing their most controllable operating costs.

II. How to exclude (or include) hours and wages

1. To exclude hours and wages for a particular position:

Select "Settings" located in the 'Username' menu.
Click 'Position Setup' under the 'Position/Departments' menu.
Click edit next to a position to include or exclude that position from the labor management reporting.

2. To exclude hours and wages for a particular earning code:

Select "Settings" located in the 'Username' menu.
Click 'Earning Code Setup' which is under the 'Time & Attendance' menu.
Click edit next to the earnings code to exclude or include that earnings code from labor management reporting.

III. Reports that show excluded hours and wages

Finally, to view items that are being excluded, you can head into Reports and look at one of two reports that show Excluded Hours & Wages:

1. Portfolio Report: There is an overall portfolio view of how much is being excluded. This is the very first report in the 'Labor Summary' menu. called 'Labor Cost Comparison (Group).' The total of anything excluded is shown in the far right column.

2. Individual Hotel Report: To view the specific details being excluded in a hotel, you can go into the 'Employee' menu and choose 'Excluded Employee Details.'