Labor Cost Ratio Calculator
Calculate total labor cost and its percentage of revenue.
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How to calculate labor cost ratio
Labor cost ratio shows how much of revenue is used for wages, payroll taxes, bonuses, and staffing-related expenses. For restaurants and service businesses, it is a key measure for staffing efficiency and operating pressure.
Enter revenue and labor expenses to calculate total labor cost and its percentage of revenue. Use it for monthly reviews, scheduling decisions, expansion planning, or staffing adjustments.
Formula or logic
- Labor cost ratio = Total labor cost ÷ Revenue × 100%
- Total labor cost = Wages + payroll costs + bonuses + other labor expenses
Example
If monthly revenue is 600,000 and total labor cost is 180,000, the labor cost ratio is 30%. That means 30 out of every 100 in revenue goes to labor-related expenses.
Common questions
Does labor cost include only wages?
No. It should usually include wages, overtime, payroll taxes, bonuses, allowances, and other staff-related expenses.
What if the ratio is too high?
Review peak and off-peak scheduling, workflow, menu complexity, service model, and whether revenue supports the current staffing plan.
Can I compare the ratio across different shops?
Use caution. Service intensity, dine-in share, opening hours, and menu complexity can all affect labor cost ratio.