Wednesday, November 4, 2026 · For people who sign the checks Calculators · About
Menu & Margin
Open a restaurant and improve how it runs—checklists, operations tools, and free calculators for independent owners

By Menu & Margin editorial team · Published · Updated

Calculator

Labor Cost Percentage

Calculate what percentage of revenue goes toward employee compensation, including wages, taxes, and benefits. Combined with food cost, these form your prime cost.

Total gross pay for all employees during the period (before taxes)
Employer-paid payroll taxes (FICA, unemployment, etc.)
Health insurance, workers' comp, uniforms, meals, etc. (optional)
Total sales during the period

How to Calculate Labor Cost Percentage

The labor cost percentage formula is:

Labor Cost % = (Total Labor Costs / Total Revenue) × 100

Worked example

Wages $12,000 + payroll taxes $1,500 + benefits $500 = $14,000 labor. Revenue $45,000 → labor cost % = 14,000 ÷ 45,000 × 100 = 31.1%. Overlay sales-by-hour before cutting headcount.

Where Total Labor Costs include:

  • Gross wages and salaries (hourly and salaried employees)
  • Employer payroll taxes (Social Security, Medicare, unemployment)
  • Benefits (health insurance, retirement contributions)
  • Workers' compensation insurance
  • Other labor-related costs (uniforms, meals, training)

How to read the result

We do not publish unsourced labor-percentage “industry benchmarks” here. Wage laws and service models differ too much. Track your own trend and overlay sales-by-hour vs. scheduled hours—see Running better → Labor cost.

Prime Cost: The Combined Metric

Prime cost is the sum of food cost and labor cost. It represents your two largest controllable expenses:

Prime Cost = Food Cost + Labor Cost

We do not publish an unsourced “ideal” prime-cost band here—service style and wage markets differ. Track your own trend across recent closed weeks, then use the prime cost calculator and labor-cost triage when the number moves against you.

Tips to Control Labor Costs

  1. Use scheduling software: Align staffing with demand patterns (see our scheduling comparison)
  2. Track labor in real-time: Monitor labor percentage during each shift
  3. Cross-train employees: Flexible staff reduces overstaffing
  4. Analyze busy vs. slow periods: Schedule efficiently around peaks
  5. Reduce overtime: Overtime costs 1.5x regular wages
  6. Review manager salaries: Ensure management labor is appropriately allocated
  7. Use technology: Self-service kiosks and online ordering can reduce labor needs
  8. Monitor turnover: High turnover increases training costs and inefficiency