A minimum wage increase hits your wallet directly. Many hospitality entrepreneurs underestimate the impact and get blindsided by higher costs. Calculate step-by-step exactly what a wage increase costs you annually.
What counts toward labor costs?
Labor costs extend far beyond gross wages. You're also paying employer contributions on top of the minimum wage:
- Gross wage: The new minimum wage
- Employer contributions: Approximately 25-30% extra (pension premium, unemployment insurance, disability insurance, etc.)
- Holiday pay: 8% of the annual salary
- Possibly 13th month: If you pay this out
⚠️ Note:
Always calculate with total labor costs, not just gross wages. Employer contributions make the difference between profit and loss.
Calculate the impact per employee
For each employee earning minimum wage, you calculate the difference per hour first, then project it annually.
? Example:
Minimum wage jumps from €12.00 to €13.20 per hour (+€1.20)
- Gross difference: €1.20 per hour
- Employer contributions (27%): €0.32 per hour
- Total difference: €1.52 per hour
At 32 hours per week: €1.52 × 32 × 52 = €2,527 per year extra
Add up all employees
Create an overview of all employees earning minimum wage and tally their hours. This mistake alone costs the average restaurant EUR 200-400 per month when owners forget to include part-time staff in their calculations.
? Example restaurant:
- Chef 1: 38 hours/week
- Chef 2: 24 hours/week
- Server 1: 20 hours/week
- Server 2: 16 hours/week
Total: 98 hours/week × €1.52 = €149 per week extra
Per year: €149 × 52 = €7,748 extra labor costs
Translate to impact on your P&L
These extra costs directly slash your profit. Calculate what this means for your profit margin and how much extra revenue you need to compensate.
? Compensation calculation:
Extra costs: €7,748 per year
Average profit margin: 8%
Required extra revenue: €7,748 ÷ 0.08 = €96,850 per year
That's €1,863 extra revenue per week!
Options to limit the impact
You've got several options to absorb the cost increase:
- Raise prices: Calculate how much more expensive your menu needs to be
- Work more efficiently: Fewer hours through better planning
- Increase productivity: More revenue per work hour
- Save costs elsewhere: Lower food costs or other savings
⚠️ Note:
Calculate the impact well in advance. Waiting until the increase takes effect gives you less time to adapt your business.
Track this in your administration
Monitor your labor costs as a percentage of your revenue. A typical labor cost for restaurants runs between 28-35% of revenue. If you exceed 35%, it becomes difficult to remain profitable.
With a system like tools for cost tracking, you can see your total costs (food + labor + other) in one overview, so you can quickly adjust if the ratios get out of balance.
Related articles
How do you calculate the impact of a minimum wage increase?
Calculate the hourly rate difference including employer contributions
Subtract the old minimum wage from the new one and add 25-30% employer contributions. This gives you the actual cost difference per hour.
Add up all hours of minimum wage employees
Make a list of all employees earning minimum wage and add up their weekly hours. Don't forget part-time staff and weekend helpers.
Calculate what this costs per year
Multiply the total number of hours per week by the cost difference per hour, then by 52 weeks. This gives you the annual impact on your labor costs.
✨ Pro tip
Run your calculations 6 months before any announced wage increase takes effect. This gives you enough time to adjust menu prices, renegotiate supplier contracts, or restructure shifts without rushing decisions.
Calculate this yourself?
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Frequently asked questions
Do I also need to include holiday pay in the calculation?
What if I have employees earning just above minimum wage?
How often should I make this calculation?
Can I fully pass on the cost increase in my prices?
What is a healthy labor cost as a percentage of revenue?
Should I include temporary and seasonal staff in my calculations?
How do overtime rates factor into minimum wage increases?
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
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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