Are your labor costs quietly draining your restaurant's profits? Most independent restaurants spend 30-40% of revenue on labor, making it their largest expense. If this percentage creeps too high, you'll watch your profits vanish completely.
What is a healthy labor cost percentage?
Most independent restaurants should target a labor cost percentage between 28% and 35% of revenue. Your specific target depends on your service concept and operational model.
- Fine dining: 32-40% (more staff per guest)
- Casual dining: 28-35% (standard service)
- Fast casual: 25-30% (minimal service)
- Delivery/takeout: 20-28% (no table service)
? Example:
Restaurant with €40,000 revenue per month:
- Head chef: €3,200
- Sous chef: €2,800
- 2 servers: €4,400
- Dishwasher: €1,800
- Owner salary: €3,000
Total: €15,200 = 38% labor costs
This exceeds the healthy range for casual dining. Target 33% maximum.
How do you calculate your labor cost percentage?
The calculation seems straightforward, but you must include every labor expense - including your own compensation.
Formula:
Labor cost percentage = (Total labor costs / Revenue) × 100
⚠️ Note:
Include your own salary even if you don't draw it. Your time carries real value and excluding it skews your calculations.
Which costs do you include in labor costs?
Every personnel-related expense counts:
- Gross salaries (including yourself)
- Employer contributions (social premiums, roughly 25% of gross)
- Holiday pay and 13th month bonus
- Pension and health insurance
- Temporary staff and freelancers
- Training costs
? Example calculation:
Month with €35,000 revenue:
- Gross salaries: €8,500
- Employer contributions (25%): €2,125
- Temporary staff: €800
- Your own salary: €2,500
Total: €13,925 ÷ €35,000 = 39.8%
This percentage demands immediate action. Cut costs or boost revenue.
What if your labor cost percentage is too high?
Two strategies can bring your labor costs back into line:
Option 1: Generate more revenue per staff member
- Streamline kitchen processes
- Accelerate service delivery
- Serve more guests per shift
- Increase average check value
Option 2: Reduce labor expenses
- Schedule strategically (fewer staff during quiet periods)
- Cross-train staff for multiple roles
- Implement automation where feasible
- Optimize service planning
⚠️ Note:
Don't sacrifice quality for cost savings. Poor service will destroy more revenue than you'll save on payroll - a mistake that costs the average restaurant EUR 200-400 per month.
How do you track this daily?
Monitor your labor costs against revenue weekly. Early detection prevents small problems from becoming major financial drains.
- Weekly: Total all hours worked and multiply by hourly rates
- Monthly: Calculate precise percentages including employer contributions
- Per quarter: Compare against previous periods and industry standards
A food cost calculator like KitchenNmbrs can automatically monitor your labor costs and alert you before percentages climb too high.
How do you calculate your labor cost percentage? (step by step)
Gather all labor costs from the past month
Add up: gross salaries, employer contributions (25%), temporary staff, your own salary, holiday pay and other personnel costs. Don't forget any cost item.
Determine your total revenue from the same month
Get your revenue figures excluding VAT from exactly the same period as your labor costs. Make sure the period matches exactly for a fair comparison.
Calculate the percentage using the formula
Divide total labor costs by revenue and multiply by 100. For example: €12,000 labor costs ÷ €40,000 revenue × 100 = 30% labor cost percentage.
✨ Pro tip
Calculate your labor cost percentage separately for your 3 busiest versus 3 slowest days each month. You'll often discover you're overstaffed during quiet periods, which inflates your monthly average by 2-4 percentage points.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
Should I include my own salary as owner?
What if my labor cost percentage exceeds 40%?
Are temporary staff costs included in labor calculations?
Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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