Labor Cost Percentage Calculator

About this calculator

Labor cost percentage divides total labor cost (wages, salaries, payroll taxes, and benefits) by total revenue, expressing staffing expense as a share of what the business brings in. It is one of the two components of prime cost in restaurant accounting — the other being food and beverage cost — and together those two numbers are the single biggest lever most restaurants and service businesses have over profitability.

Because labor is largely a fixed or semi-fixed cost that does not scale down instantly with a slow sales day, tracking this percentage over time (by week, by shift, or by location) helps managers spot overstaffing or understaffing relative to revenue and adjust schedules before the ratio drifts out of a healthy range for the business.