A busy Saturday night with 200 covers can cost you an extra €500 in labor, while a slow Tuesday might run on skeleton crew. Labor costs are your restaurant's biggest expense and consist of fixed and variable parts. Most hospitality entrepreneurs miscalculate their real labor costs per hour, leading to incorrect break-even calculations.
What are fixed labor costs?
Fixed labor costs are expenses you pay every month, regardless of how many guests walk through your door. These costs run continuously, even during your slowest periods.
- Fixed contracts: Sous chef, manager, full-time cooks
- Employer contributions: Employer taxes on fixed salaries (approximately 25% on top of gross salary)
- Holiday pay: 8% of gross salary, paid out in May/June
- Pension premiums: Depending on your pension plan
💡 Example fixed labor costs:
Restaurant with 2 permanent staff members:
- Sous chef: €3,200 gross + €800 employer contributions = €4,000
- Full-time cook: €2,800 gross + €700 employer contributions = €3,500
- Holiday pay (8%): €480 per month
Total fixed labor costs: €7,980 per month
What are variable labor costs?
Variable labor costs fluctuate with your service volume. More covers means you'll need additional hands, driving costs up. Slower nights let you send people home early, reducing expenses.
- Flexible staff: On-call workers, freelancers, temp workers
- Overtime: Extra hours from permanent staff during rush periods
- Weekend help: Students, side jobs
- Seasonal staff: Extra personnel during peak seasons
💡 Example variable labor costs:
Busy Saturday night (150 covers):
- 2 extra servers: 8 hours × €15 = €240
- 1 extra cook: 6 hours × €18 = €108
- Sous chef overtime: 3 hours × €25 = €75
Extra costs: €423 for 150 guests = €2.82 per guest
Why this distinction matters
The split between fixed and variable costs determines your break-even point and financial risk if sales drop unexpectedly.
⚠️ Watch out:
High fixed labor costs mean you need minimum monthly revenue to break even. These expenses continue running even during empty service periods.
A restaurant with €8,000 fixed labor costs must generate enough monthly revenue to cover these expenses. With a 15% average margin, you'd need €53,000 in sales just to pay your permanent staff.
How do you calculate your total labor costs?
The formula for total labor costs is:
Total labor costs = Fixed costs + (Variable costs per hour × Number of extra hours)
💡 Example total labor costs:
Month with average busy periods (20 working days):
- Fixed costs: €7,980
- Variable hours: 15 days × 12 extra hours × €16 = €2,880
- Busy weekends: 8 days × 20 extra hours × €17 = €2,720
Total: €13,580 labor costs this month
Labor costs as a percentage of revenue
Hospitality operators typically express labor costs as a percentage of revenue. This metric helps you track performance and benchmark against industry standards.
- Casual dining: 28-35% of revenue
- Fine dining: 35-45% of revenue (more service per table)
- Fast casual: 25-30% of revenue
- Delivery/takeaway: 20-28% of revenue (less service)
⚠️ Watch out:
If your labor costs consistently exceed 40%, you're likely operating at a loss. Review if you're overstaffed for your typical service volume.
Flexibility vs. security
There's a trade-off between operational flexibility and team stability. More fixed contracts means:
- Advantages: Consistent service quality, reduced recruitment, cohesive team
- Disadvantages: Higher fixed costs, reduced flexibility during slow periods
More flexible contracts means:
- Advantages: Lower fixed costs, easier cost adjustments
- Disadvantages: Less stable team, increased scheduling complexity
Practical tips for labor costs
Track your labor costs weekly, not just monthly. From years of working in professional kitchens, I've seen restaurants catch cost overruns early and adjust staffing before problems compound.
💡 Weekly check:
- Add up all hours worked (fixed + variable)
- Multiply by average hourly wage (including employer contributions)
- Divide by that week's revenue
- Target 30-35% for most restaurants
How do you calculate your labor costs per month?
Calculate your fixed labor costs
Add up all fixed salaries, including employer contributions (approximately 25% extra), holiday pay (8% per year = 0.67% per month) and pension premiums. You pay this amount every month, regardless of your revenue.
Calculate your variable labor costs
Keep track of how many extra hours you use for flexible staff, overtime and weekend help. Multiply by the average hourly wage including employer contributions. This varies per week depending on how busy you are.
Calculate the percentage of your revenue
Add fixed and variable labor costs and divide by your monthly revenue. Aim for 28-35% for most restaurants. If you consistently exceed 40%, look at your staffing levels.
✨ Pro tip
Calculate your fixed labor costs as a daily amount over the next 6 months. If you need €267 daily just to cover permanent staff, you'll know exactly how many covers you must serve each day to break even.
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 percentage of my revenue should go to labor costs?
Most restaurants should target 28-35% of revenue for labor costs. Fine dining operations can run higher at 35-45% due to intensive service requirements, while fast casual typically runs lower at 25-30% with fewer staff per guest.
Should I include employer contributions in my labor costs?
Absolutely. Employer contributions add roughly 25% on top of gross salaries and represent real costs to your operation. Excluding them creates an unrealistic picture of your true labor expenses.
What if my labor costs are too high?
Start by analyzing your fixed costs - you might have too many full-time staff for your average service volume. Consider shifting to more flexible contracts or cross-training team members to handle multiple roles during slower periods.
How do I handle seasonal fluctuations in labor costs?
Build a core team of fixed staff for your slowest periods, then add variable labor during peak seasons. Track your labor costs as a percentage of revenue monthly to identify patterns and plan staffing levels 8-12 weeks ahead.
📚 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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