8 Proven Strategies to Reduce Restaurant Labor Costs in Saudi Arabia
8 practical strategies to reduce restaurant labor costs in Saudi Arabia, from staff scheduling and cross-training to POS and payroll automation.
According to a new study, Saudi Arabia is actively healing from the pandemic, and 80% of its employers plan to expand their workforce in 2022.
Are you a restaurant business owner in Saudi Arabia looking to expand your business but stuck with the high restaurant labor costs? If yes, you must be looking for a quick solution to handle this, isn’t it?
Then dive into this article and grab these seven strategies to control the high restaurant cost. We have also included how indulging restaurant POS systems in Saudi Arabia can reduce labor costs. Now let’s learn about them.
How Much Should Restaurant Labor Cost?
Before you can reduce restaurant labor costs, it helps to know what a healthy number looks like. Labor cost percentage is calculated as:
Labor Cost % = (Total Labor Cost ÷ Total Revenue) × 100
Total labor cost includes wages, overtime, GOSI (social insurance) contributions, bonuses, and any other employee-related expense, not just base salary.
Industry benchmarks commonly place restaurant labor cost between 25% and 35% of total revenue, though the right number depends on your format. A quick-service outlet with a lean menu can often run leaner than a full-service or fine-dining concept with table service and a larger kitchen team. Rather than chasing a single "ideal" number, track your labor cost percentage consistently and use it to spot trends before they become a real problem.
8 Practical Strategies to Reduce Restaurant Labor Costs
1. Reduce Employee Attrition and Turnover
If your employee retention is poor, then that’s a serious problem. The pandemic has not only changed businesses but also changed workers.
Some recent studies show that the hospitality sector is facing attrition rates. So, how does attrition affect business?
For instance, let’s assume you are a restaurant business owner based in Saudi Arabia. When a new employee joins the team, you spend your time and money to train them. If they leave after a few months, your time and money are gone.
So, this is why a high attrition rate is one strong reason for high restaurant labor costs. It depletes your revenue. To control employee attrition rate, develop better growth opportunities, incentives, and good work culture.
One step further, you can provide specific employee welfare policies and team-building exercises. These practices can help in retaining employees.
2. Cross-Train Your Staff for Flexibility
Restaurant operations include customer service, food preparation, cleaning, accounting, reporting, purchasing raw materials, etc. You will have a working structure and a team of whom must perform what operation.
But what if there are unforeseen and sudden openings in the restaurant and you lack a particular employee to do a task? This can end in chaos.
This is where cross-training exercises will lend a hand. Cross-training exercises not only ensure all employees can handle multiple tasks and roles but also helps them grow professionally. For instance, if you have implemented the best restaurant POS system in Saudi Arabia, train all your employees on how to handle it.
When your employee efficiency improves, there will be an improvement at the organizational level. Simultaneously you can also handle your employees with the restaurant management software in Saudi Arabia.
3. Build a Fair, Performance-Linked Salary Structure.
Among other salary structures, the commission-based one brings more joy to the employees.
Why?
Because apart from the fixed salary, the employee will get some brownie points which encourages them to do the job well.
So, we highly recommend having a composite compensatory package for your employees. You can also offer the same for your temporary or part-time workforce in your restaurant.
However, it is equally essential to review your profits and salary structures frequently to avoid paying your employees high than the industry average.
If your business didn’t perform as expected, you might change the salary structure. But before taking that step, explain it to your employees to avoid high employee turnover.
4. Use Part-Time and Seasonal Staff Strategically
Hiring a full-time employee is expensive. No doubt about that. But again, as the title claims, you can’t just hire part-time help all the time. You need some trustworthy full-time employees to support your business.
But as a small restaurant owner, hiring part-time employees can benefit in multiple ways. Part-time employees charge hourly, which is lower than a full-time employees. Also, you can offload unskilled and general chores to temporary employees and reduce the overall payroll burden.
So, hiring part-time or seasonal workers can benefit you and if you find them efficient, pull them into a full-time employees. Thus, the part-time employee can help in the cost reduction strategy for restaurants.
5. Automate Billing, Ordering, and Kitchen Operations
Today, the world is embracing technology in multiple ways to advance. With stiff competition in the restaurant business in Saudi Arabia, it is crucial to implement some advantage tools and software to keep up the game. In fact, restaurant technology is increasingly automating the usual routines. So by automating, you limit the human and labor effort. This saves labor costs.
Also, features such as automatic billing, online ordering, and QR code ordering have cut off the need for human interference.
But what software should you invest in for automation? We recommend investing in the best pos software in Saudi Arabia, such as Postbytz. This software can help you streamline human efforts, automates minor operations, eliminates errors, and lowers restaurant labor costs.
6. Measure and Improve Employee Efficiency with Data
Measuring employee efficiency is a challenging task for a restaurant business owner. You can do it by defining proper roles and goals and setting Key Performance Indicators for each team. And at the end, monitor if they can manage to achieve the goals. But how will you get proper results?
Well, you can track your employee and manage the restaurant business with the restaurant POS system.
If your restaurant business has the best POS system for restaurants in Saudi Arabia, you can quickly get reports about the staff’s performance from the POS software. Thus you can measure and improve the staff’s efficiency. By improving staff efficiency, you can improve productivity. This way, you reduce the restaurant labor cost without any layoffs.
7. Plan Smarter Schedules Based on Demand
It’s understandable that the restaurant business is dynamic, and it can get affected by certain unpredictable events. So, during hectic times, you must review the customer orders and plan the schedules for your full-time or part-time employees. This will help control the payroll cost, minimize kitchen wastage and also run the restaurant at its best capacity.
8. Automate Payroll and Attendance Tracking
Manual attendance sheets and spreadsheet-based payroll are a hidden source of restaurant labor cost. Buddy punching, calculation errors, and missed overtime alerts all quietly inflate payroll without showing up as an obvious line item.
HR and payroll software built for restaurants automates attendance tracking, shift management, and role-based access, and ties staff hours directly to pay, removing the manual reconciliation and errors that come with it.
A Note on Saudization (Nitaqat) and Workforce Planning
Saudi restaurant owners planning their staffing structure also need to factor in Saudization (Nitaqat) requirements alongside pure cost considerations. Balancing Saudi and expatriate hires to stay compliant, while keeping the workforce mix efficient, is now part of labor cost planning in the Kingdom rather than a separate HR exercise. Speak with a local labor consultant or your HR provider to confirm the current requirements for your restaurant's size and category.
Frequently Asked Questions
What percentage of revenue should restaurant labor cost be?
Most restaurants aim to keep labor cost between 25% and 35% of total revenue, though quick-service concepts can often run leaner and full-service or fine-dining restaurants tend to sit higher due to more staff-intensive service. Track your own percentage over time rather than relying on a single universal target.
How do you calculate restaurant labor cost percentage?
Divide your total labor cost (wages, overtime, benefits, and social insurance contributions) by total revenue for the same period, then multiply by 100. Calculating this monthly, or even weekly during busy periods, makes it easier to catch cost creep early.
Does reducing labor cost mean cutting staff?
Not necessarily. Cutting headcount without fixing the underlying causes of high labor cost (poor scheduling, low retention, manual processes) often just shifts the cost into slower service, burned-out staff, and lost customers. Most of the strategies above, cross-training, better scheduling, and automation, reduce cost by working smarter rather than understaffing.
How can restaurant technology help reduce labor costs?
POS, KDS, and payroll automation remove manual, repetitive tasks like order-taking, ticket routing, and attendance tracking, so the same team can handle more volume without added hours. Reporting tools also make it easier to spot inefficiencies, like overstaffed slow periods, that would otherwise go unnoticed.
What is the biggest driver of high labor costs in Saudi restaurants?
Employee turnover and reactive, non-data-driven scheduling are consistently among the largest controllable drivers. Both create hidden costs (retraining expenses, and overtime or overstaffing) that don't always show up clearly until you start tracking labor cost percentage regularly.
Conclusion
Controlling restaurant labor costs in Saudi Arabia isn't about spending less on your team. It's about spending more intentionally. Reducing turnover, cross-training staff, building fair pay structures, and automating billing, kitchen, and payroll workflows all work together to bring your labor cost percentage into a healthy range without sacrificing service.
Start by tracking your current labor cost percentage, then work through the strategies above one at a time. Small, consistent changes to scheduling and staff efficiency compound quickly over a full year.
Ready to see how much of this you can automate? PosBytz brings POS, KDS, staff performance reporting, and HR and payroll together in one restaurant management platform built for Saudi F&B businesses, so your team can focus on service instead of spreadsheets.
Related Resources
About the author
The PosBytz Marketing Team
Editorial Team, PosBytz
The PosBytz Marketing Team shares practical insights on running smarter restaurants and retail stores from POS best practices to inventory management, online ordering, and customer loyalty strategies.
