The ratio between fixed and variable labor costs determines how well you can respond to fluctuations in business. Many restaurants have too many fixed costs, which means they still spend a lot of money on staff during quiet periods. In this article, you'll learn how to monitor and adjust this ratio monthly.
What are fixed versus variable labor costs?
Fixed labor costs are the wage costs you always have, regardless of your revenue. Think of your head chef, manager, and yourself as the owner. Variable labor costs are the costs that move with business volume: extra servers on busy evenings, helpers on weekends.
💡 Example ratio:
Restaurant with €50,000 revenue per month:
- Fixed labor costs: €8,000 (chef, manager)
- Variable labor costs: €7,000 (servers, helpers)
Ratio: 53% fixed, 47% variable
Why this ratio matters
If you have too many fixed labor costs, you're locked into high wage costs even during quiet months. With too many variable costs, you don't have a stable foundation and constantly need to find staff.
- Ideal ratio: 60-70% fixed, 30-40% variable
- Too much fixed: Difficult to cut costs when things go wrong
- Too much variable: No stable kitchen, quality varies
Calculate your current ratio
Grab your payroll from last month and divide all labor costs into two groups:
💡 Example calculation:
Total labor costs March: €15,000
- Head chef (fixed contract): €3,500
- Manager (fixed contract): €2,800
- Owner (own salary): €2,000
- Regular servers: €2,200
- Extra servers (variable): €2,800
- Weekend helpers: €1,700
Fixed: €10,500 (70%)
Variable: €4,500 (30%)
Signs your ratio isn't right
⚠️ Watch for these signals:
- Your labor costs stay high even when revenue drops
- You can't quickly respond to quiet periods
- You constantly have staff shortages during busy times
How to adjust the ratio
Too many fixed costs? Consider converting a fixed contract to on-call staff for certain shifts. Too many variable costs? Give your best flexible staff a fixed contract for security.
💡 Practical example:
Restaurant notices labor costs are too high during quiet January:
- Problem: 85% fixed labor costs
- Solution: Convert weekend servers from fixed to on-call
- Result: 70% fixed, 30% variable
- Savings in January: €1,200
Digital monitoring
Many entrepreneurs track this in Excel, but it takes time. With a system like KitchenNmbrs, you can automatically categorize labor costs and see your ratio each month without manual calculations.
How do you monitor the ratio of fixed versus variable labor costs?
Gather all labor costs from last month
Get your payroll administration and add up all wage costs: fixed contracts, on-call staff, temporary workers, your own salary. Don't forget to include payroll taxes and pension contributions.
Divide into fixed and variable
Fixed costs: all contracts that continue regardless of revenue. Variable costs: on-call staff, extra shifts, temporary workers. Unsure? Then it's probably variable.
Calculate the percentage of each
Divide fixed costs by total labor costs × 100. Do the same for variable costs. Check: they should add up to 100%. Aim for 60-70% fixed, 30-40% variable.
✨ Pro tip
Always check your ratio together with your revenue for that month. Lower revenue with the same fixed costs means your labor percentage goes up - time to become more flexible.
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
What is the ideal ratio between fixed and variable labor costs?
For most restaurants, 60-70% fixed and 30-40% variable is a good ratio. This gives you a stable foundation with enough flexibility to respond to business fluctuations.
How often should I check this ratio?
Check this monthly, especially in the first months of the year. Seasonal fluctuations can affect your ratio, so adjust where needed.
What if my fixed labor costs are too high?
Consider converting certain fixed contracts to on-call basis for less critical functions. Do this gradually and keep your core team for stability.
Should I count my own salary as fixed costs?
Yes, count your own salary as fixed costs. Even if you don't always pay it out, it's still a cost item your restaurant carries.
What payroll taxes should I include?
Include all employer contributions: social insurance, pension contributions, disability insurance. These are usually 25-30% on top of the gross salary.
📚 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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