I used to think cutting staff was the only way to fix high labor costs until I discovered most restaurants waste €200-400 monthly on poor scheduling alone. Your labor cost percentage might be too high, but firing people isn't your only move. You can work smarter, boost revenue per hour, and deploy your team more efficiently.
What is labor cost percentage?
Your labor cost percentage shows how much of your revenue goes to staff. The formula is straightforward:
Labor cost percentage = (Total labor costs / Revenue) × 100
Most restaurants aim for 25-35%. Above 35%? Profit becomes nearly impossible.
💡 Example:
Restaurant with monthly revenue €50,000:
- Wages and salaries: €15,000
- Social contributions: €3,000
- Total labor costs: €18,000
Labor cost percentage: (€18,000 / €50,000) × 100 = 36%
Increase your revenue per hour
The fastest way to slash your labor cost percentage? Generate more revenue with the same team. Every extra euro lowers your percentage automatically.
- Menu engineering: Push dishes with higher margins
- Upselling: Train staff to suggest sides and drinks
- Faster turnover: Shorter wait times = more covers per shift
- Add delivery: Extra revenue without additional waitstaff
💡 Example:
Better upselling increases your average check from €28 to €32:
- Before: 100 covers × €28 = €2,800/day
- After: 100 covers × €32 = €3,200/day
- Extra revenue: €400/day = €12,000/month
Your labor cost percentage drops from 36% to 31% without extra costs!
Optimize your staff scheduling
Too many restaurants overstaff during quiet periods and understaff during rushes. Smart scheduling accomplishes the same work with fewer total hours.
- Analyze occupancy patterns: Track your quiet and busy periods
- Flexible schedules: More hands during peaks, fewer during lulls
- Cross-training: Staff who can handle kitchen and service
- On-call staff: For unexpected rushes or sick calls
⚠️ Watch out:
Scheduling too tightly backfires. Stressed staff make mistakes, guests wait longer, and bad reviews follow. Balance is key.
Increase productivity per employee
Poor prep organization is a mistake that costs the average restaurant €200-400 per month by slowing down service 15-20%. Your team can accomplish more in the same time with smarter systems.
- Improve mise-en-place: Better prep equals faster service
- Optimize kitchen processes: Reduce prep times and steps
- Digital order tickets: Fewer mistakes, faster communication
- Standardize recipes: Less thinking, more consistency
💡 Example:
Better mise-en-place makes your chef 10% faster:
- Before: 8 hours per day × €20/hour = €160
- After: 7.2 hours per day × €20/hour = €144
- Savings: €16/day = €480/month
At €50,000 revenue, this saves almost 1 percentage point on labor costs.
Reduce sick leave and staff turnover
Sick days and turnover cost serious money. Replacements are expensive (overtime, temp agencies) and new hires are less productive initially.
- Good work environment: Happy staff call in sick less
- Ergonomic workplaces: Prevent back injuries and repetitive strain
- Fair schedules: Rotate the less desirable shifts
- Growth opportunities: Give people reasons to stay
Automate where possible
Some tasks can be automated or digitized, freeing your team for more valuable work.
- Online reservations: Less phone time
- Digital menus: Self-service ordering
- Automatic inventory tracking: Reduce admin time
- Digital HACCP: Faster temperature logging
⚠️ Watch out:
Automation costs money upfront. Calculate if your investment pays back within 12-18 months.
Monitor your progress
Track your labor cost percentage weekly. You'll spot trends and see if your changes are working.
- Calculate labor cost percentage every week
- Compare with the same week last year
- Watch for seasonal patterns (summer vs. winter)
- Adjust if the percentage creeps up again
Food cost calculators can help track these numbers automatically, so you'll know quickly if you're on track.
How to lower your labor cost percentage? (step by step)
Calculate your current labor cost percentage
Add up all labor costs (wages + social contributions + temp agencies) and divide by your monthly revenue. Multiply by 100 for the percentage.
Analyze your revenue per hour and per employee
Look at which hours generate the most revenue and where your team is least productive. This shows where you can optimize without losing staff.
Implement one improvement per month
Start with the easiest wins: better upselling, smarter scheduling, or process optimization. Measure the effect on your labor cost percentage after one month.
✨ Pro tip
Calculate your revenue per labor hour for each day over the next 2 weeks. This pinpoints exactly which shifts are bleeding money and need immediate attention.
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 a healthy labor cost percentage for a restaurant?
Most restaurants should aim for 25-35%. Fine dining can run slightly higher (up to 40%) due to intensive service requirements. Fast casual typically runs lower (20-28%) with fewer staff needs.
Can I lower my labor cost percentage by cutting wages?
Technically yes, but it's not sustainable. Lower wages create higher turnover, worse service, and ultimately higher costs. Focus on productivity and revenue instead.
How quickly will I see results from these measures?
Some changes (better upselling, smarter scheduling) show results within 2-4 weeks. Process optimization and automation typically take 2-6 months for full impact.
What if my labor cost percentage keeps rising despite these measures?
You likely have a structural issue: prices too low, insufficient customers, or inefficient processes. Consider getting external help or conducting a thorough operational analysis.
Should I include social contributions in my labor costs?
Absolutely. Labor costs include more than gross wages - add social contributions, pension premiums, and temp agency fees. Otherwise your calculations will be misleading.
How do cross-trained employees help lower labor costs?
Cross-trained staff can fill multiple roles during a shift, reducing your minimum staffing requirements. One person can handle both bar and service during slower periods, cutting your labor hours by 10-15% on average.
📚 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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