Restaurant Labor Cost Calculator

It depends on the service model:

Quick-service/food trucks: 20-25% — smaller crews, no table service.
Fast casual: 25-30% — some service staff, simpler operations.
Full-service casual: 30-35% — larger front-of-house teams, hosts, bussers.
Fine dining: 33-40% — high staff-to-guest ratios, sommeliers, specialized roles.

These benchmarks assume fully burdened cost (wages + taxes + benefits), not just gross payroll. If you're only tracking what shows up on paychecks, your real labor cost is 20-30% higher than you think. Use your labor percentage alongside food cost to calculate prime cost — the single best measure of restaurant health.

Fully burdened labor cost goes well beyond paychecks. Here's what it includes:

• Hourly wages and salaries — the base amount
• Overtime pay — 1.5x rate after 40 hours/week
• Employer payroll taxes — Social Security (6.2%), Medicare (1.45%), FUTA, state unemployment
• Workers' comp insurance — roughly 1% of payroll for restaurants
• Health insurance — required for 50+ FTE employers under ACA
• Paid time off and sick leave — varies by state law
• Retirement contributions — if offered

The fully loaded cost is typically 20-30% higher than gross wages alone. A $15/hr employee actually costs $18-$19.50/hr once you add everything up.

The formula is: Labor Cost % = (Total Labor Cost ÷ Total Revenue) × 100. Use your fully burdened labor cost, not just gross wages.

Example: Gross wages are $20,000/month. Add payroll taxes and benefits, and total labor cost is $24,000. Revenue is $80,000. Your true labor cost percentage is 30% — not the 25% you'd get from wages alone. That 5-point difference could mean the gap between profitability and break-even. For the full profitability picture, run your numbers through our restaurant profit margin calculator.

Gross wages are what shows up on paychecks — hourly pay times hours worked, plus salaries. Fully burdened (or fully loaded) labor cost adds employer-side costs on top of gross wages:

FICA: 7.65% of wages
Unemployment insurance: 0.5-6%+ depending on state and claims history
Workers' comp: ~1% for restaurants
Benefits: health insurance, PTO, retirement match

Most independent restaurant owners only track gross wages and underestimate their true labor cost by 20-30%. This makes their profit margin calculations unreliable. Always use fully burdened numbers when making staffing decisions.

Prime cost is food cost (COGS) plus total labor cost combined. It's the most watched metric in the restaurant industry because these are your two largest and most controllable expenses.

Targets by format:
QSR: under 55-60%
Full-service: under 60-65%

Example: food cost is 30% and labor is 32%. Your prime cost is 62% — tight but manageable. Above 65% and you're almost certainly losing money after rent, utilities, and other fixed costs. To get your food cost side dialed in, see our guide on how to control food cost.

Employer payroll taxes typically add 10-13% on top of gross wages. The breakdown:

FICA (Social Security + Medicare): 7.65%
FUTA (federal unemployment): 0.6% on the first $7,000 per employee
SUTA (state unemployment): 0.5% to 6%+ depending on your state and claims history
Workers' comp: roughly 1%

So a $15/hr employee actually costs about $16.50-$17/hr in wages plus taxes alone — before any benefits. Add health insurance and PTO, and you're looking at $18-$19.50/hr. Multiply that gap across 20-30 employees and it's thousands per month that many operators overlook.

Cutting headcount is the blunt instrument. Smarter approaches:

1. Schedule to demand: Pull POS sales data by daypart and match staffing to actual volume. A half-hour adjustment per shift across 10 employees saves 5 hours/day — that's $3,800/month at $15/hr.
2. Eliminate overtime: One cook at 50 hours costs the same as 1.25 cooks at 40 hours. Cross-train staff so you can spread hours across more people.
3. Simplify your menu: A 40-item menu needs more prep cooks than a 25-item menu. Use menu engineering to cut low-performers and reduce kitchen labor.
4. Stagger start times: Not everyone needs to arrive at 4pm for a 5pm dinner service. Stagger prep cooks, line cooks, and servers based on when they're actually needed.

Weekly is the best practice for any restaurant doing over $500K/year in revenue. Monthly P&L reviews find problems 30 days too late — by then, a scheduling issue has already cost you thousands.

Run your labor cost percentage every week, ideally broken out by daypart (lunch vs. dinner). You'll catch things like:

• Overstaffing on slow Tuesday lunches
• Overtime creeping up on your strongest cooks
• Seasonal demand shifts that require schedule changes

Some operators even track labor cost daily using their POS system's real-time labor reports. Pair this with weekly COGS tracking to keep both halves of prime cost in check.