Staffing costs can make or break your restaurant's profitability, yet many owners struggle to find the sweet spot. For independent hospitality businesses, labor typically runs between 25% and 40% of revenue, varying by concept and operational efficiency. The key is knowing where you should land and how to calculate it accurately.
What exactly is labor cost?
Labor cost encompasses all personnel expenses: wages, social contributions, holiday pay, health insurance and employer taxes. Your own salary as an entrepreneur also counts, even if you don't always pay yourself.
- Gross wages of all employees
- Social contributions (approximately 25% on top of gross wage)
- Holiday pay and 13th month bonus
- Your own entrepreneur salary (even if you don't pay it out)
Normal labor cost percentages by type of business
💡 Benchmarks by concept:
- Fine dining: 35-40% of revenue
- Casual dining: 28-35% of revenue
- Bistro/brasserie: 25-32% of revenue
- Fast casual: 22-28% of revenue
- Delivery/takeout: 18-25% of revenue
- Bar with food: 25-35% of revenue
The more service you provide, the higher your labor cost. A fine dining restaurant requires more staff per guest than a delivery operation.
How do you calculate your labor cost percentage?
The formula is straightforward, but you need to include all costs:
Labor cost % = (Total personnel costs / Revenue excl. VAT) × 100
💡 Example calculation:
Restaurant with €50,000 revenue per month (excl. VAT):
- Chef: €3,500 gross + €875 social contributions = €4,375
- Sous-chef: €2,800 gross + €700 social contributions = €3,500
- 2 servers: 2 × €2,400 + social contributions = €6,000
- Your entrepreneur salary: €3,000
Total: €16,875 / €50,000 = 33.8%
What if your labor cost is too high?
Above 40% becomes challenging for profitability. You've got several options to consider:
- Improve efficiency: Better planning, reduce overlapping shifts
- Increase revenue: More guests during existing hours
- Adjust prices: If you're underpriced for your service level
- Modify your concept: Move toward less labor-intensive operations
⚠️ Note:
Don't forget to include your own entrepreneur salary in calculations, even if you don't pay it out. Otherwise your labor cost appears lower than reality.
Seasons and labor cost
Your labor cost fluctuates seasonally. During quiet months the percentage rises because you maintain fixed personnel costs while revenue drops. Busy months see the percentage decrease.
💡 Example seasonal difference:
Bistro with fixed personnel costs of €12,000/month:
- Busy month (€45,000 revenue): 26.7% labor cost
- Quiet month (€25,000 revenue): 48% labor cost
That's why annual calculations matter more than monthly snapshots.
Labor cost and profitability
Here's a rule of thumb: food cost + labor cost together shouldn't exceed 65-70% of revenue. After managing kitchen operations for nearly a decade, I've seen too many restaurants fail because they ignore this fundamental ratio.
- Food cost: 28-35%
- Labor cost: 25-35%
- Other costs: 25-30%
- Profit: 5-15%
A food cost calculator like KitchenNmbrs can automatically track your labor cost percentage and compare it against other expenses.
How do you calculate your labor cost percentage? (step by step)
Gather all personnel costs
Add up all gross wages from the past month. Add 25% social contributions on top. Don't forget holiday pay, 13th month bonus and your own entrepreneur salary.
Determine your revenue excluding VAT
Get your revenue figure from the same month. Convert this to excluding VAT by dividing by 1.09 (at 9% VAT). This is your actual revenue for the calculation.
Calculate the percentage
Divide your total personnel costs by your revenue excluding VAT and multiply by 100. The result is your labor cost percentage for that month.
✨ Pro tip
Track your labor cost percentage every 2 weeks during peak season rather than monthly. You'll catch staffing inefficiencies 14 days sooner and can adjust schedules before they impact your quarterly profits.
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 in the labor cost?
Yes, even if you don't pay yourself. Calculate at least €2,500-€3,500 per month for your own work, otherwise you'll get a distorted picture of your actual costs.
What if my labor cost is above 40%?
Then profitability becomes difficult. Check if you're scheduling too much staff for your revenue, or if your prices match the service level you offer.
Does labor cost differ by season?
Yes, during quiet months the percentage rises because you have fixed personnel costs but less revenue. Focus on your annual average instead of just bad months.
Are social contributions always 25% of gross wage?
Roughly yes. The exact percentage depends on your employees' ages and whether they fall under the hospitality collective agreement, but 25% works as a solid budgeting rule.
📚 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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