Labour percentage, also called labour cost percentage, is the proportion of a business’s sales used to pay employees and related employment costs during a defined period. In restaurants, it is a key operating metric used to evaluate staffing efficiency, schedule performance and the relationship between labour expense and revenue.
Labour percentage = (total labour cost ÷ net sales) × 100.
For example, if labour cost is $30,000 and net sales are $100,000, the labour percentage is 30%.
The definition should be consistent across reporting periods. A restaurant may include hourly wages, salaries, overtime, employer payroll taxes, statutory contributions, benefits and other employment-related costs. Some businesses report direct labour separately from management, payroll burden or contract labour, so comparisons should specify what is included.
Labour dollars show the actual expense. Labour percentage expresses that expense relative to sales. Labour percentage can rise even when scheduled hours stay the same if sales fall, which is why managers should review both the percentage and the underlying labour hours and sales volume.
Use sales forecasts to build schedules, match staffing to daypart demand, cross-train employees where appropriate and review overtime and productivity. Avoid reducing staffing below the level required for safe food handling, legal breaks, service quality or reasonable workload.
Labour percentage measures labour relative to sales. Prime cost combines food and beverage cost with labour cost, usually as a percentage of sales. Together, these measures provide a broader view of the restaurant’s controllable operating costs.
Chef’s tip: compare labour percentage by daypart and sales level. A single monthly average can hide quiet shifts that need a different staffing model from busy services.
This term is one of hundreds covered in depth across OCS courses, learning paths, and 1-on-1 coaching with Chef Eric.
