Labor Cost Formula
How do you calculate restaurant labor cost percentage?
Direct answer
Add wages, salaries, overtime, payroll taxes, benefits, and any other labor costs included in your reporting policy. Divide that total by sales for the same period and multiply by 100.
Key points
- Labor Cost % = Total Labor Cost / Total Sales x 100.
- Do not compare a payroll period with sales from different dates.
- Track dollars and percentage because a lower percentage can hide costly overtime during unusually strong sales.
What to do next
- 1Total all labor expense covered by your chosen definition for the week.
- 2Total net restaurant sales for those same dates.
- 3Divide labor by sales, multiply by 100, and compare by daypart and sales volume.