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Labor Cost Percentage Calculator

Enter total labor cost and total revenue to find the labor cost percentage.

How it is calculated

The tool divides labor cost by revenue for the same period: labor % = labor cost ÷ revenue × 100. Both inputs are money amounts in one currency (shown in dollars) for a week, a month or any other period you choose.

It also shows revenue − labor cost, which is what remains after paying for labor, before food, rent and other costs. Labor cost may be zero but not negative, and revenue must be above zero, otherwise nothing is returned. The result is a percentage rounded to two decimals; it can exceed 100% if labor costs more than the sales. The tool applies no benchmark, so what counts as a healthy percentage depends on your type of business.

Worked example

In one month a restaurant pays $18,500 in total labor (wages, payroll taxes and benefits) and takes in $62,000 in sales.

Labor % = 18,500 ÷ 62,000 × 100 = 29.84%. The amount left after labor is 62,000 − 18,500 = $43,500.00, from which food cost, rent and everything else must still be paid.

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Common mistakes

  • Dividing weekly labor by monthly revenue (or the reverse). Both figures must cover the same period.
  • Counting only wages and leaving out payroll taxes, benefits and the owner's paid hours, which makes the percentage look lower than it is.
  • Using profit or sales after discounts in one place and gross sales in another; keep the revenue definition the same from period to period.
  • Reading the amount left after labor as profit. Food, rent, utilities and other costs still have to come out of it.
  • Comparing your percentage with a figure from a different kind of business. A fast-food counter and a full-service restaurant have very different normal ranges.

About this calculator

Labor cost percentage divides total labor cost (wages, salaries, payroll taxes, and benefits) by total revenue, expressing staffing expense as a share of what the business brings in. It is one of the two components of prime cost in restaurant accounting — the other being food and beverage cost — and together those two numbers are the single biggest lever most restaurants and service businesses have over profitability.

Because labor is largely a fixed or semi-fixed cost that does not scale down instantly with a slow sales day, tracking this percentage over time (by week, by shift, or by location) helps managers spot overstaffing or understaffing relative to revenue and adjust schedules before the ratio drifts out of a healthy range for the business.

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