How to Calculate Labor Cost Percentage (With a Free Calculator)
Updated 17 October 2026 · 5 min read
Labor cost percentage is the share of your sales spent on paying your team. Divide total labor cost for a period by sales for the same period, then multiply by 100: $7,500 of labor against $25,000 of sales is 30%. Count wages plus the employer costs on top of them, not just hourly pay.
Use the same period for both numbers: a week, a fortnight or a month.
Total labor cost (labour cost in Australia and the UK) is everything you pay to employ people for that period. Total sales is your revenue for the same period, usually net of discounts, refunds and sales tax or GST. Whichever definition you choose, keep it the same every week so the trend means something.
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Gross wages and salaries, including managers and supervisors who work in the business.
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Overtime, penalty rates, allowances and holiday pay actually paid in the period.
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Employer payroll taxes and social insurance, such as Social Security and Medicare in the US or employer National Insurance in the UK.
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Employer retirement contributions, such as superannuation in Australia or a workplace pension in the UK.
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Workers’ compensation insurance and any staff benefits you pay for.
Add employer on-costs, not just wages
Wages alone understate what a shift costs. The main employer on-costs below were checked on official sites on 17 October 2026. They are minimums: awards, state payroll tax, insurance and benefits add more, so ask your accountant for your full rate.
Main employer on-costs by country (checked 17 October 2026)
Country
Main employer on-cost
Rate
United States
Main employer on-cost: Social Security and Medicare (employer share)
Rate: 6.2% + 1.45% = 7.65% of wages (Social Security up to the annual wage base)
United Kingdom
Main employer on-cost: Employer Class 1 National Insurance, 2026–27
Rate: 15% of earnings above £5,000 a year (£96 a week), plus workplace pension
Australia
Main employer on-cost: Superannuation guarantee
Rate: 12% of ordinary time earnings (from 1 July 2025), plus payroll tax and workers’ compensation where they apply
A quick way to estimate
If you know your total on-cost rate, multiply wages by (1 + that rate). Wages of $6,900 with 7.65% on-costs is $6,900 × 1.0765 = $7,427.85 of labor cost.
Worked examples
One week in three businesses
Business
Sales
Wages
On-costs
Labor cost
Labor %
Café, Australia
Sales: A$18,000
Wages: A$4,500
On-costs: 12% super: A$540
Labor cost: A$5,040
Labor %: 28.0%
Restaurant, United States
Sales: $25,000
Wages: $6,900
On-costs: 7.65%: $527.85
Labor cost: $7,427.85
Labor %: 29.7%
Retail store, United Kingdom
Sales: £30,000
Wages: £3,600
On-costs: Assumed 10% (NI above the threshold plus pension): £360
Labor cost: £3,960
Labor %: 13.2%
The café spends 28 cents of every dollar of sales on labour. If next week’s sales drop to A$15,000 with the same roster, the same A$5,040 becomes 33.6%. That is why labor cost percentage is worth checking every week, not once a quarter.
Calculate your labor cost percentage
Enter a week’s sales and wages and your on-cost rate. The calculator also shows the labor budget for a target percentage, so you can plan next week’s roster to it. Your figures stay in your browser.
At 30% of $25,000.00 in sales, your labor budget is $7,500.00, so this period is $72.15 under.
Employer Social Security and Medicare is a starting point only; add awards, payroll tax, insurance and benefits for your real rate. Your figures stay in your browser.
What is a good labor cost percentage?
For restaurants, industry guides commonly cite 25–35% of sales, with about 30% as a typical target (Toast, Netchex). Quick-service operations tend to sit lower and full-service or fine dining higher, up to around 40% (Restolabs).
Treat these as rough guides, not rules. Your menu prices, service style, award rates and rent all change what is healthy. The most useful benchmark is your own trend: the same calculation, the same way, every week. Retail stores, pharmacies and cleaning businesses have very different cost structures, so compare yourself with your own history first.
Roster to demand. Put more people on the busy hours and fewer on the quiet ones instead of running the same headcount all day.
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Watch the edges of the day. Overlapping opening and closing shifts and early starts before the first customer add hours that sales don’t cover.
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Get break and clock times right. Unpaid breaks that aren’t recorded become paid time; one-tap clock-in on server time removes guesswork.
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Check the week against sales before you publish. A quiet Tuesday shouldn’t carry a Saturday-sized roster.
5.
Cross-train. When more people hold each skill, you can cover gaps without calling in an extra person or paying overtime.
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Handle swaps with approval. A swap approved by a manager keeps the right number of people on, with the right skills.
Rosterly helps with most of this: it shows a base-wage estimate for the week while you build the roster, checks skills before anyone is assigned and removes unpaid breaks from paid time. It doesn’t calculate overtime, penalty rates or awards; those stay with your payroll provider. See how it works for cafés and restaurants.
Build next week’s roster to your labor target
See the week’s base-wage estimate as you build. 14-day free trial, no card needed.
Some restaurants want labor targets set automatically from projected sales in their point-of-sale system. Restaurant-focused tools such as 7shifts do this on their higher plans. Rosterly doesn’t read POS sales; it suits teams who set the roster themselves and want a flat price for every location. Compare the two: Rosterly vs 7shifts.
The labor cost nobody counts: building the roster
Labor cost percentage covers the people on shift, but the manager hours spent building the roster, chasing swaps and fixing timesheets cost money too. Put in your own numbers to see what that time is worth each month.
Staff on your team
Hours a week you spend on the roster
Your hourly cost as a manager
$
Per-person price you pay today (optional)
$
Rosterly for 20 staff
Team: A$59 a month, flat
Up to 25 staff, every feature, staff never pay.
Your time on the roster today: about $390 a month.
Your figures stay in your browser. Rosterly prices are in Australian dollars, including GST.