Restaurant labor cost percentage calculator

How the calculator works

Take one period, a week or a month, and use the same period for every number. Add the hourly wages you paid to the salaries for that period, then add what you pay on top of that pay as the employer: payroll taxes, workers' compensation, health and other benefits. Enter that extra as a percentage of pay; your payroll report or accountant can tell you the figure, and it is often somewhere around 10 to 20 percent, but use your own.

Labor cost percentage is that total divided by sales for the same period. The labor budget runs the relation the other way: sales times the percentage you aim for. The difference between the two is how far over or under target the period ran, in dollars. Sales per labor hour divides sales by the hours your hourly staff worked, a number many schedulers use to decide whether a shift had too many or too few people.

Worked example

A week brings in $28,000 of sales. Hourly staff worked 400 hours and were paid $6,400, and the salaried chef and manager cost $2,000 for the week, so pay comes to $8,400. Payroll taxes and benefits add 12%, which is $1,008, and the total labor cost is $9,408.

$9,408 ÷ $28,000 = 33.6% of sales. With a 30% target the week could have spent $28,000 × 0.30 = $8,400 on labor, so it ran $1,008 over. Sales per labor hour were $28,000 ÷ 400 = $70. At $16 an hour plus 12%, cutting about 56 hourly hours would have closed that gap without touching the salaried roles.

What to include and what to leave out

Include every hour you paid for: prep, cleaning, training shifts and overtime at the rate you actually paid. Include salaried managers and chefs if they work in the restaurant, and the owner's pay if the owner works a station, because a business that only looks profitable while the owner works for free is not. Leave out tips that guests pay to staff, since they are not your cost, but include any wage you top up to reach the minimum. Contract cleaners or a payroll service are usually counted with operating costs, not labor; whichever way you choose, count them the same way every period.

Choosing a target

Restaurant trade guides often quote a labor cost of roughly 25 to 35 percent of sales as a rule of thumb, with quick service toward the low end and full service toward the high end. Treat it as a starting point, not a rule. Labor and food together make up prime cost, and a common way to set the labor target is to start from the prime cost you can afford, subtract your food cost percentage, and use what is left. A kitchen that buys whole ingredients and cooks from scratch spends more on labor and less on food than one that buys prepared items.

Reading the result week to week

One week can mislead: a holiday, a slow rainy Tuesday or a training week moves the percentage without anything being wrong. Compare the same weeks over time and look at sales per labor hour next to the percentage. If sales fall and the schedule stays the same, the percentage rises even though nobody worked longer, so the fix is usually scheduling to expected sales rather than cutting pay.

What this tool does not do

It works on totals you enter for one period and keeps nothing after you close the page. It does not read your point of sale or payroll, does not apply tax rules for any country or state, and it is arithmetic on your numbers, not accounting, payroll or legal advice.