How to calculate restaurant labor cost
Labor cost percentage is total labor cost divided by sales for the same period. Total labor cost includes hourly wages, overtime, salaries, and the employer's share of payroll taxes and benefits. For example, $12,600 of labor on $42,000 of sales is a 30% labor cost.
The mistake most people make is leaving out everything but hourly wages. Employer payroll taxes alone (Social Security and Medicare) are 7.65% of pay, before unemployment insurance, workers' compensation and any benefits. Many restaurants use 10–15% on top of wages as an estimate; your payroll provider can give you the exact figure.
What's a good labor cost percentage for a restaurant?
Most full-service restaurants land between 25% and 35% total labor, and quick-service restaurants often run in the low-to-mid 20s. Fine dining, scratch kitchens and high-minimum-wage markets tend to run higher. Labor and food cost together — prime cost — is usually kept to roughly 60–65% of sales.
Treat these as starting points rather than rules. The useful number is your own labor % tracked week over week, compared against your own target.
Sales per labor hour, and scheduling to a target
Sales per labor hour (SPLH) is sales divided by hourly labor hours worked. It shows how productive each hour you schedule is, and unlike labor %, it isn't moved by a raise or a change in pay rates.
The most useful number in this calculator is the hours your target allows. Take your labor budget (sales × target %), subtract salaries and taxes, divide by your average hourly cost, and you know how many hours you can schedule before you build the schedule — not after payroll runs.