15

Lee's Sandwiches on Labor Allocation and Overtime

Managing labor and Overtime (OTs) cost for each unit will be critical to maintain profit margin by hour for each store and maximize profit and labor used.

Website

Labor & Overtime

Managing labor and Overtime (OTs) cost for each unit will be critical to maintain profit margin by hour for each store and maximize profit and labor used. This is especially important when minimum wage is going up to $20 per hour in April in the state of California, where most of Lee’s units are located.

Although I am unsure whether Lee’s Sandwiches is exempt from this minimum wage increase since we do sell baked goods and breads as a standalone menu item, it is always good to prepare, and to have best practices in place for managing labor hours and OTs.

Our goals for this portion of the presentation

  • Plan a strategic way to monitor and manage labor hours and OTs at the store level on a daily basis
  • Utilize transactions to projected hours method for scheduling

Challenges and Observation

  • Ineffective staffing due to lack of live monitoring and standardized system in place to manage labor hours efficiency daily
  • Overstaffing/Understaffing happens too frequently
  • Best practices for preventing OTs are not regularly enforced

Labor Hours

Scheduled labor hours should depend on the needs of the business, and should be monitored closely by the hour at each store.

To do this, I recommend providing daily projected/budgeted labour hours based on the amount of transactions projected per day, and closely monitor the transactions by the hour to predict the efficiency of labor hours and take action swiftly when needed.

Labor hours based on transactions

Set a rate for labor hours vs transactions depending on business goals

Average transactions amount daily at a store is 800 Average check amount is $18 Total daily sale at the store: $18 * 800 = $14,400 If the objective of the company is only 20% total sales is permitted to allocate to labor, then Labor $ daily is capped at $14,400 * 20% = 2,880

The average wage is $20.00 / hour Projected allowed labor hours: 2,880 / 20 = 144 hours

800 transactions get you 144 hours so 1 transaction/labor hour will be 192/800 = 0.24. So every transaction daily gives you 0.24 labor hours. This will be the rate for transactions to labor hours. We can adjust this rate accordingly depends on the average check amount, percentage allocation to labor hours, minimum wages, and other factors.