About the Labor Cost Percentage Calculator
This labor cost percentage calculator shows how much of every sales dollar goes to paying your team. Enter sales for a period, hourly wages, salaried pay and a labor burden rate for payroll taxes, workers’ compensation and benefits. The calculator returns your labor cost percentage, total loaded labor cost, the labor budget your target allows, how far over or under budget you are and the sales you would need to hit the target with the same schedule.
It is designed for restaurant, café, bar and retail managers who build weekly schedules, and for owners reviewing a monthly P&L. Add the labor hours you scheduled to see sales per labor hour (SPLH), a scheduling metric that is easier to manage shift-by-shift than a percentage.
Use the same period for sales and labor — a week, a pay period or a month. Many full-service restaurants aim for labor around 25%–35% of sales and quick-service concepts lower, but the right number depends on your menu, service style and local wage rates; what matters most is the combined prime cost of food plus labor.
With the default inputs, the labor cost percentage is 32.28%. Change any value above to recalculate instantly.
How to use the labor cost percentage calculator
- 1Pick a period (week, pay period or month) and enter net sales for it.
- 2Enter hourly wages and salaried pay for the same period.
- 3Add your payroll tax and benefits burden as a percentage of pay.
- 4Optionally enter scheduled labor hours to get sales per labor hour.
- 5Set your target labor percentage and compare the budget with actual labor.
Formula and method
Total labor cost is everything you pay to employ people for the period: hourly wages (including overtime), salaried pay and the employer-side burden of payroll taxes, workers’ compensation insurance, health insurance and other benefits. Customer tips passed through to staff are not a business cost and are left out. Dividing labor cost by net sales gives the labor cost percentage.
The labor budget is simply sales × target percentage; the variance shows how many dollars you are over or under that budget. Sales needed is the reverse question — how much revenue the same labor spend would need to land on target. Sales per labor hour divides sales by scheduled hours and is a handy daily scheduling benchmark.
- Burden %
- Employer taxes and benefits as a percent of pay
- Sales
- Net sales for the same period as the labor
- Target %
- Desired labor cost as a percent of sales
- SPLH
- Sales per labor hour
Worked examples
Monthly full-service restaurant
Wages and salaries total $24,500; a 12% burden adds $2,940 for $27,440 of labor. Divided by $85,000 of sales that is 32.28%, $1,940 over a 30% budget of $25,500. The same labor would hit 30% at $91,467 of sales.
Weekly coffee shop
Pay of $4,100 plus 10% burden is $4,510, or 32.21% of $14,000 in sales. At a 28% target the budget is $3,920, so the week ran $590 over; sales per labor hour were $14,000 ÷ 230 = $60.87.
Retail store under budget
$22,000 of pay plus 15% burden is $25,300, or 21.08% of $120,000 sales — $1,100 under the 22% budget of $26,400.
Frequently asked questions
How do you calculate labor cost percentage?+
Add up all labor costs for a period — wages, salaries, payroll taxes and benefits — and divide by net sales for the same period, then multiply by 100. For example, $27,440 of labor on $85,000 of sales is a 32.3% labor cost.
What is a good labor cost percentage for a restaurant?+
Many full-service restaurants run roughly 25% to 35% labor, with quick-service often lower. Judge it together with food cost: a combined prime cost around 60% of sales is a common benchmark.
Should tips be included in labor cost?+
Tips paid by customers and passed through to employees are not a business expense, so leave them out. Do include employer payroll taxes on tips and any tip credit wages you pay, since those are your costs.
Should manager salaries count in labor cost?+
Yes, include salaried managers and chefs to get your total labor percentage. Some operators also track hourly labor separately because it is the part they can adjust when building shift schedules.
What is sales per labor hour?+
Sales per labor hour (SPLH) is net sales divided by the labor hours worked. It shows how productive each scheduled hour is and lets managers set staffing levels by forecast sales rather than by habit.