Restaurant labor cost percentage: how to calculate and lower it

Restaurant labor cost percentage is your total labor cost for a period divided by your net sales for the same period, times 100. Count wages, salaries, overtime, employer payroll taxes and benefits. In the made-up week below, $11,305.79 of labor against $34,000 in sales gives a labor cost of 33.3%.

This guide covers what to count, what federal data says about restaurant pay and benefits, a worked week you can copy, and the changes that bring the figure down. It gives no target, because service style, menu and rent all move the right number. Compare yourself with your own past weeks. If your problem is people leaving, start with our restaurant turnover guide. If you run a drive-thru, our drive-thru staffing guide covers positions by lane layout.

What goes into restaurant labor cost?

Use net sales as the bottom of the fraction: sales after discounts and comps, before sales tax and tips. For the top, add every line below that your business pays.

Cost line	Count it?	Where to find it
Hourly wages, including overtime	Yes	Payroll register, gross pay by role
Salaried managers and chefs	Yes, on their own line so you can also track hourly labor alone	Payroll register
Employer Social Security and Medicare	Yes. The IRS sets the employer share at 6.2% for Social Security and 1.45% for Medicare, 7.65% in all	Payroll tax report
Unemployment taxes and workers' compensation	Yes	Payroll tax report and insurance bill
Health plan, retirement and paid leave you fund	Yes	Benefits invoices and payroll
Service charges paid out to staff	Yes. The IRS treats a set service charge paid to an employee as wages	Payroll register
Tips guests leave	No. Guests pay them. Count the wage you pay tipped staff	Tip report, for payroll only
Staff meals, uniforms, payroll service fees	Your choice. Decide once and keep it the same every week	Bookkeeping

The IRS rates come from its page on Social Security and Medicare withholding rates, and the service charge rule from its page on tips and service charges. Your payroll provider's employer tax report shows what you paid on top of wages.

What does federal data say about restaurant pay?

The Bureau of Labor Statistics publishes average hourly earnings for restaurant workers each month. These are pay per hour. They leave out benefits and the employer's payroll taxes.

BLS series	June 2025	June 2026	Change
All employees, food services and drinking places (seasonally adjusted)	June 2025, all employees: $21.16	June 2026, all employees: $22.02	All employees: up 4.1%
Production and nonsupervisory employees, full-service restaurants (not seasonally adjusted)	June 2025, full-service: $21.10	June 2026, full-service: $22.14	Full-service: up 4.9%
Production and nonsupervisory employees, limited-service restaurants (not seasonally adjusted)	June 2025, limited-service: $16.65	June 2026, limited-service: $17.25	Limited-service: up 3.6%

The change column is our arithmetic on the BLS figures. BLS has also published July 2026 figures, which it marks preliminary: $22.08, $22.21 and $17.19 for the three series.

A separate BLS survey counts what pay leaves out. In its Employer Costs for Employee Compensation table for June 2026, private employers in accommodation and food services spent $20.03 per hour worked on compensation. Wages and salaries were $16.18 (80.8%) and benefits $3.85 (19.2%), of which legally required benefits were $1.82 (9.1%). By our division, that is about 24 cents of benefits for every dollar of wages. If your own figure is far from that, check that your labor cost includes every line in the table above.

How do you calculate it? A worked week

Every number below is made up for a full-service restaurant. Swap in your own payroll and POS figures.

Line	Made-up input	Cost
Hourly wages	500 regular hours at $16.50	Hourly line: $8,250.00
Overtime	20 hours at $24.75 (time and a half)	Overtime line: $495.00
Salaried manager	One week of salary	Salary line: $1,200.00
Gross pay	Sum of the three lines	Gross pay: $9,945.00
Employer Social Security and Medicare	7.65% of gross pay	Employer tax line: $760.79
Other employer costs	Unemployment tax, workers' compensation and health plan, a made-up weekly total	Other costs line: $600.00
Total labor cost	Gross pay plus both employer lines	Total labor: $11,305.79

With $34,000 in net sales, labor cost percentage is $11,305.79 divided by $34,000, or 33.3%. Pay alone is $9,945 divided by $34,000, or 29.3%. Leave out the employer lines and the figure comes out four points low.

Work out sales per labor hour too. The example has 520 hourly hours, so $34,000 divided by 520 is $65.38 of sales for each hour worked. This figure stays the same when pay rates change, so it shows whether you scheduled the right number of hours.

Which hours cost the most?

A weekly percentage hides the quiet hours. Pull sales by hour from your POS and hours on the clock from your time clock, then work out sales per labor hour for each block. Here is one made-up Tuesday:

Block	Sales	Staff on the clock	Labor hours	Sales per labor hour
11am to 2pm	Lunch sales: $2,400	8	24	Lunch: $100.00
2pm to 5pm	Afternoon sales: $540	6	18	Afternoon: $30.00
5pm to 9pm	Dinner sales: $3,200	10	40	Dinner: $80.00

The afternoon block earns less than a third of lunch for each hour worked. That is where to look first: stagger start times, send one person home at 2pm, or move prep into those hours so the kitchen needs fewer people at dinner.

How can you lower labor cost percentage?

Change	What to do	What to measure
Schedule to sales by hour	Build next week's schedule from sales by block over the last four of the same weekday	Sales per labor hour by block
Cut overtime	Keep each person under 40 hours in the workweek and give extra shifts to part-timers	Overtime hours each week
Stop early clock-ins	Set a clock-in window in your POS or time clock and check the edit report	Minutes clocked outside the schedule
Keep new hires	A named trainer and set check-ins for the first 90 days	Exits within 90 days of hire
Simplify prep	Cut items that need their own prep, and batch prep into quiet blocks	Prep hours each week
Take tasks off the floor	List what pulls staff away from guests during service, such as a ringing phone	Minutes per shift spent on each task
Raise sales per hour	Suggest an add-on at the counter, or open a daypart with the crew already on	Sales per labor hour, and the percentage

Federal law requires overtime pay of at least time and a half for hours over 40 in a workweek, according to the Department of Labor's overtime page. Some states add their own rules, so check yours before you plan shifts.

Here is what two of those changes do to the worked week. Sending one person home from the afternoon block on four weekdays removes 12 hours: 12 times $16.50 is $198.00, plus $15.15 in employer taxes, for $213.15. Giving the 20 overtime hours to a part-timer at the regular rate saves the half-time premium: 20 times $8.25 is $165.00, plus $12.62 in taxes, for $177.62. Labor falls to $10,915.02, which is 32.1% of $34,000.

The sales side works too. With the same $11,305.79 of labor and $1,000 more in sales, the percentage falls to 32.3%.

What should you check each week?

1. Pull net sales for the week from your POS, with tax and tips taken out.
2. Pull gross pay by role from payroll, and keep salaries on their own line.
3. Add employer taxes and benefits from your payroll provider's employer report.
4. Divide total labor by net sales, and write the result next to last week's and the same week last year.
5. Work out sales per labor hour for each block of your two slowest days.
6. Count overtime hours and clock-ins outside the schedule, by manager.
7. Change one thing in next week's schedule, then check the same numbers again.

If staff leave guests to answer the phone, count those minutes before you pay for help. Maple Voice answers hours and FAQ calls and transfers other calls to staff, and Pro adds phone orders into supported POS systems. We have no data showing it lowers a restaurant's labor cost, so judge it by the phone minutes it takes off the floor.

Published by Maple, which sells AI phone answering to restaurants. This AI-assisted guide combines Bureau of Labor Statistics pay and compensation data, IRS payroll tax pages and the Department of Labor's overtime rule with an original worked week and hourly table. Every figure in the examples is made up. The guide sets no target percentage and does not report a Maple customer result or claim any product lowers labor cost.