What impacts labour costs in hospitality?
Labour costs fluctuate based on several factors, making it difficult to strike the right balance between profitability and staying on top of service. Several key factors influence these costs, starting with wage laws. Compliance with minimum wage requirements, adjustments to the National Living Wage and additional costs like holiday pay can impact payroll, especially for businesses with large teams.
Overtime pay also plays a major role, particularly during peak seasons. Poor scheduling or last-minute changes can lead to excessive overtime, quickly driving up costs and putting pressure on already stretched budgets.
Staff turnover remains one of hospitality's biggest challenges, with every departure adding expenses for hiring, onboarding, and training—while also affecting team morale. Not to mention, losing experienced employees often disrupts operations and impacts customer experience. If you’re keen on reducing employee turnover, we have an insightful webinar that could help with it.
Understanding these factors and addressing them ahead of time is essential to maintaining control over your labour costs without compromising customer service or employee satisfaction.
The 2025 UK budget and its effect on hospitality labour costs
The updates in the UK Budget also bring significant changes to hospitality wage structures. From April 2025, the National Living Wage for staff aged 21 and over will increase to £12.21 per hour from £11.44. This creates new challenges for hospitality operators already managing tight margins.
For venues of all sizes, these changes demand a more strategic approach to payroll management. Manual calculations become increasingly risky as wage structures grow more complex. Your rota software should automatically factor in these new rates, ensuring accurate wage calculations while flagging any scheduling decisions that might push you over budget.
Smart strategies for managing the increase:
-
Automate wage calculations to ensure compliance with new rates
-
Generate accurate forecasts to optimise scheduling
-
Monitor key performance indicators to identify cost-saving opportunities
The way to navigate these changes lies in having software that adapts automatically to new regulations while providing clear visibility of your labour costs. With the right tools, you can turn these challenges into opportunities to streamline operations and maintain profitability without compromising service quality.
Strategies to reduce labour costs without cutting staff
Reducing labour costs doesn’t have to come at the expense of your team. By focusing on efficiency and smarter workforce strategies, you can support your staff while staying within budget.
Rethink your schedule regularly
Your venue's foot traffic rarely follows a fixed pattern. While keeping the same rota might seem easier to manage, it often leads to overstaffing during quiet periods or scrambling for coverage during unexpected rushes. Regularly reviewing schedules helps you spot these patterns and adjust accordingly. Plus, staff often appreciate the flexibility of dynamic scheduling.
Designate tasks for each payroll log
Understanding exactly how your team spends their time can transform your payroll management. What might seem like quick tasks—restocking, prep work, cleaning—could actually be taking longer than you think. When staff log their activities in payroll records, you get a clearer picture of where time is really being spent. This insight helps identify which processes need streamlining and when additional support might be needed during peak times.
Cross-train your team
Cross-training your staff is one of the most effective ways to optimise labour costs while creating growth opportunities. Having team members who can work across different areas gives your venue natural flexibility. Rather than calling in extra staff during busy periods, your existing team can adapt to where they're needed most.
A host who can step in to serve during busy periods, or a server who can assist with basic kitchen prep, helps maintain service standards without increasing headcount. Digital learning platforms like CPL Learning make this kind of skill development accessible and engaging for your team.
Consider these approaches to training your employees:
-
Regular skill refreshers that keep your venue running smoothly, from mastering new menu items to perfecting service techniques
-
Access to industry-leading courses that broaden expertise and spark innovation in your operations
-
Structured mentoring that pairs seasoned staff with new team members, creating natural knowledge transfer while building stronger teams
Implement demand-based scheduling
Smart operators know that business levels can change as quickly as the British weather—because often, that's exactly what's driving it. When you're scheduling staff, consider factors like local events, weather forecasts and historical patterns. This doesn't mean running skeleton teams, but rather making informed decisions about when you'll need all hands on deck versus when a smaller, well-trained team can handle service effectively.
All these strategies become even more powerful when backed by the right technology.
How technology helps optimise labour costs
Here's how technology can transform your labour cost management
Time and attendance automation
Gone are the days of paper timesheets and calculations by hand. Digital time and attendance systems capture clock-ins accurately, flag irregularities instantly and feed directly into your payroll. This doesn't just save administrative time—it helps you spot patterns in attendance, manage overtime more effectively, and ensure you're only paying for actual hours worked.
Rotaready's time and attendance solution brings this efficiency to life. Through GPS-enabled mobile clock-ins or on-site tablets with Kiosk mode, your team can record attendance seamlessly while managers receive instant alerts about any irregularities. The system automatically rounds timesheets according to your policies and prepares them for payroll, saving hours of administrative work while ensuring accuracy.
Smart forecasting for better scheduling
Making staffing decisions based on gut feeling often leads to either overstaffing or stretched teams. The most effective scheduling tools use data insights, such as sales trends, reservations and even external factors like local events, to help you stay ahead during busy periods. This means you can schedule confidently, matching staff levels to expected demand while keeping labour costs in check.
This is where our scheduling software’s demand forecasting shines. By combining your sales data, booking information and even weather patterns, it helps you build rotas that perfectly match your staffing needs.
Real-time payroll monitoring
Why wait until month-end to discover you've exceeded your labour budget? Today's payroll systems show you costs as they happen, letting you track spending against targets and adjust before costs spiral. Plus, automated calculations mean fewer errors and less time spent on wage processing.
With Rotaready's integrated payroll solutions, you can choose what works best for your business. Whether you want to export perfect timesheets to your existing payroll provider or opt for our fully managed bureau service, you'll benefit from automatic wage calculations, built-in compliance checks, and seamless integration with popular systems.
Digital learning that drives efficiency
Training has evolved beyond traditional classroom sessions. Digital learning platforms now offer bite-sized modules that let your team learn and grow during quieter shifts or downtime. Plus, well-trained staff work more efficiently, directly impacting your bottom line.
CPL Learning transforms this potential into reality. Our platform delivers engaging, industry-accredited content through a mix of e-learning courses, microlearning resources and professional development tools. From essential compliance training to advanced operational skills, your team can access targeted learning that drives both personal development and operational efficiency.
Tackling labour cost challenges amid staff shortages
In this section, we’ve outlined some of the ways forward-thinking venues are using that not only fill rotas but also build stronger, more sustainable teams.
Training that works for everyone
Staff development isn't just about filling skill gaps—it's about creating pathways for growth that benefit both your team and your business. When employees see clear progression opportunities, they're more likely to stay and contribute meaningfully to your operation. Through structured training programmes, you can build a more capable team while reducing the costs linked with high staff turnover.
Smart scheduling that makes a difference
Traditional rigid schedules no longer meet the needs of today's workforce. By offering flexible working options and using smart scheduling tools, you can attract a wider talent pool while ensuring better coverage. Take the busy Christmas period—venues using flexible scheduling find it easier to handle the rush by allowing staff to pick up extra shifts that work around their commitments, rather than losing them to temporary seasonal work elsewhere.
Culture that counts
Think about your favourite place to work—what made it special? For most, it wasn't just the salary package. Building a positive workplace culture means creating an environment where everyone feels part of the team's success. Whether it's celebrating a record-breaking service or supporting someone through a challenging shift, these moments build loyalty that helps you attract and retain talent.
Tools that empower your team
Modern hospitality tools do more than just manage schedules and process payroll—they give your team more control over their working lives. Mobile apps for shift swapping, digital training platforms for development and automated systems for holiday requests all contribute to a more engaged workforce.
Ready to optimise your labour costs and boost profitability?
In this article, we've explored the landscape of hospitality labour costs—from the impact of rising minimum wages to effective staff retention strategies—and examined how smart technology can transform workforce management while building stronger teams.
Access Hospitality's integrated solutions bring these strategies to life. Through Rotaready's intelligent scheduling and CPL Learning's dynamic training platform, we help venues like yours optimise costs, boost efficiency and develop skilled teams that drive business growth.
Ready to transform your workforce management? Book a demo today and let our experts show you how leading brands like BrewDog and Warner Leisure Hotels are using our solutions to thrive in today's complex market.