Labour cost

How to calculate restaurant labor cost

Labour cost percentage is one division: total labour cost divided by net sales for the same period. The formula is not where operators get it wrong — what counts as "total labour cost," and whether every worked hour actually reached the calculation, is.

The formula

Total labour cost is gross wages plus employer payroll tax and any benefits load, for the period. Spend $52,000 on wages, payroll tax and benefits against $215,000 in net sales, and labour cost runs 24.2%. Most full-service and fast-casual operators target labour in the 25–30% range, with the right number depending heavily on format and average check — a high-volume quick-service site with a low average check usually runs a lower labour percentage than a full-service restaurant.

The failure that does not show up in the formula

The most common reason a labour percentage reads lower than reality is not a calculation error — it is unmapped point-of-sale employees. Someone clocks in on the till but was never linked to a record in scheduling or payroll, so their hours and cost reach no report. The formula still runs correctly; it is just running on an incomplete set of hours, and the result looks healthier than the store actually is.

Coverage before percentage

Labour cost coverage — the share of worked hours that actually carry a cost in your reporting — is the number that tells you whether the labour percentage above is worth trusting. Below 100% coverage, the percentage is calculated correctly on the wrong set of hours.

Check your own coverage — labour blind-spot calculator · See restaurant labor cost control