See what share of your sales goes to labor.
Labor cost = wages + related costs.
Labor cost percentage = labor cost ÷ sales × 100.
A cafe has $4,800 in wages, $600 in related costs and $18,000 in sales for the week. Labor cost is $5,400 and the percentage is 30%.
A single weekly percentage hides the hours that cost you money. Run the calculator twice for the same week: once for the slowest daypart and once for the busiest. A cafe that shows 30% for the week may show 52% from 2 to 5 p.m. and 21% at lunch. The fix is a schedule change, not a pay cut.
| Daypart | Sales | Labor cost | Labor % |
|---|---|---|---|
| 7 to 11 | $2,100 | $520 | 24.8% |
| 11 to 2 | $3,300 | $610 | 18.5% |
| 2 to 5 | $900 | $470 | 52.2% |
Start with wages for hours worked, including overtime and paid breaks. Add employer payroll taxes, workers’ compensation and benefits if you want the fully loaded figure. Leave out the owner’s draw unless you also record it as wages. Whatever you choose, keep the definition the same from week to week or the trend will mislead you.
When the percentage is too high for a daypart, the schedule is where you act. Move a shift that starts at 2:00 to 3:30, split a close, or cross-train a cashier to run the grill during slow hours. After a change, run the same week again and compare. Keep a note of what you changed so you can tell which change worked.
Labor cost percentage mixes two things, how many hours you schedule and what you pay per hour. Sales per labor hour separates the first. Divide sales by hours worked in the same period. A fictional cafe with $18,000 in weekly sales and 260 staff hours makes $69.23 per labor hour. If a raise lifts wages, the percentage rises but sales per labor hour does not change, which tells you the schedule is not the problem.
Many restaurant owners track prime cost: cost of food and beverage sold plus total labor cost, as a share of sales. It covers the two largest costs that managers control week to week.
| Item | Amount | Share of sales |
|---|---|---|
| Sales | $18,000 | 100% |
| Cost of food and beverage sold | $5,580 | 31.0% |
| Labor cost from the calculator | $5,400 | 30.0% |
| Prime cost | $10,980 | 61.0% |
Set your own target from your history and menu. A quick-service site and a full-service restaurant will land in different places.
Under the Fair Labor Standards Act, tips belong to the employees who receive them, so customer tips are not your sales and are not your labor cost. What you pay is labor cost: the cash wage, any tip credit top-up needed to reach minimum wage, and employer payroll taxes, which in the US include the employer share of FICA on reported tips. Some states, California among them, do not allow a tip credit, so the full minimum wage is the labor cost for every hour.
EZTime shows real-time labor costing as shifts are scheduled, so managers can see the cost before the week starts rather than after.
It depends on your industry. Compare with your own history.
It depends on how they are paid and your accounting.
Weekly works for many shift-based teams.
Either works if you stay consistent. Net sales, after discounts and refunds, show labor against the money you kept.
Yes. Overtime hours cost more per hour, so a week of covering absences can raise the percentage even when sales are flat.
Yes. A very low percentage can mean thin staffing, long waits and burned-out employees.
Yes, add their pay for the period. Leaving them out makes the percentage look low and hides what a location really costs to run.
Use only the wages for people working that shift and the sales rung up during it. The daypart table above shows why this is often more useful than a weekly total.
EZTime records hours and totals them for payroll. Book a demo to see it with your own team.