A pizzeria owner discovers they're spending €12,000 monthly on staff with €40,000 revenue, wondering if their 30% labor cost is sustainable. Labor cost represents the percentage of revenue going to staff, while personnel costs show the actual euros spent on your team. Both metrics reveal different aspects of your restaurant's financial health.
The difference in definition
Personnel costs represent every euro you spend on staff monthly or yearly. This covers gross wages, social contributions, pension premiums, health insurance, and additional employment benefits.
Labor cost shows what percentage of revenue goes toward staffing. This metric reveals the relationship between your personnel spending and income generation.
💡 Example:
Restaurant with €50,000 monthly revenue:
- Personnel costs: €18,000 per month
- Labor cost: (€18,000 / €50,000) × 100 = 36%
The labor cost of 36% falls within the normal range for restaurants.
What counts as personnel costs?
Personnel costs extend far beyond gross wages on payslips. You must account for the complete cost per employee:
- Gross wage: The payslip amount
- Employer contributions: Social premiums, roughly 20-25% of gross wage
- Pension premium: Employer portion, typically 5-8% of gross wage
- Health insurance: If you provide coverage
- Holiday pay: 8% of gross wage
- Other allowances: Travel costs, phone, uniforms
💡 Example total personnel costs:
Chef with €3,000 gross wage per month:
- Gross wage: €3,000
- Employer contributions (22%): €660
- Pension premium (6%): €180
- Holiday pay: €240
Total costs: €4,080 per month
How do you calculate labor cost percentage?
The formula appears straightforward, but you need to include all personnel costs:
Labor cost % = (Total personnel costs / Revenue excl. VAT) × 100
⚠️ Note:
Always calculate with revenue excluding VAT. Using VAT-inclusive revenue makes your labor cost appear artificially lower.
Common percentages in hospitality
Labor cost fluctuates based on establishment type and service level:
- Fast food / snack bar: 25-30%
- Casual dining: 30-35%
- Fine dining: 35-40%
- Café / bar: 20-28%
- Delivery / takeaway: 18-25%
Higher service levels demand more staff, driving up labor costs. Fine dining restaurants require significantly more personnel than delivery operations. It's the kind of thing you only learn after closing your first month at a loss – service intensity directly correlates with staffing expenses.
💡 Example comparison:
Two restaurants, same revenue €40,000/month:
- Pizzeria: €10,000 personnel costs = 25% labor cost
- Fine dining: €14,000 personnel costs = 35% labor cost
Both percentages are normal for their establishment types.
Why both figures matter
You need both metrics for effective business management:
- Personnel costs in euros: For budgeting and cash flow planning
- Labor cost percentage: For comparing periods and industry benchmarks
- Combined analysis: To determine if rising costs stem from higher revenue or increased wages
Rising labor cost percentages with stable revenue signals overstaffing. But if revenue grows while percentages remain steady, you're scaling healthily.
Digital tracking vs. Excel
Many operators track personnel costs in Excel, which creates manual work. You must add wage components and calculate percentages yourself. Systems like KitchenNmbrs automatically compute labor costs once you input revenue and personnel data.
How do you calculate your labor cost? (step by step)
Add up all personnel costs
Create an overview of gross wages, employer contributions, pension premiums, holiday pay, and other allowances for one month. Don't forget temporary staff or freelancers who work regularly.
Calculate your revenue excluding VAT
Take your monthly revenue and subtract the VAT. At 9% VAT, divide by 1.09. For example: €50,000 incl. VAT becomes €45,872 excl. VAT.
Divide personnel costs by revenue
Use the formula: (Personnel costs / Revenue excl. VAT) × 100. A result between 25-40% is normal, depending on your type of establishment and service level.
✨ Pro tip
Track your labor cost during your 3 busiest and 3 quietest shifts each month. If the variance exceeds 12 percentage points, you can cut costs through smarter scheduling.
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 VAT when calculating labor cost?
No, always calculate with revenue excluding VAT. Using VAT-inclusive revenue makes your labor cost appear artificially lower. Divide your revenue by 1.09 to remove the VAT.
Do temporary staff count as personnel costs?
Yes, all costs for people working in your kitchen or service count. This includes temporary staff, freelance chefs, and temporary help during busy periods.
What if my labor cost comes out above 40%?
Then you're likely overstaffing relative to your revenue. Check if you're scheduling too many people during quiet periods, or raise prices to generate more revenue per guest.
Are holiday pay and 13th month part of personnel costs?
Yes, all staff allowances count as personnel costs. Spread holiday pay and 13th month payments over 12 months to calculate accurate monthly averages.
📚 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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