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Guide

Restaurant Labor Cost Percentage Including Benefits: What to Count and What Is Normal

Published 2026-10-08 · 4 min read

The short answer

The National Restaurant Association (2025) reports that full-service restaurants spent a median of 36.5% of sales on salaries and wages, including benefits, in 2024. The profitable operators in that data sat at a median of 34.2%. The loss-making ones sat at 42.9%.

These are medians, not targets. If your number includes benefits and sits above 36.5%, look at your schedule first.

The formula in words

Labor cost % = (salaried pay + hourly wages + employer payroll taxes + benefits) ÷ total sales for the same period.

Use the same dates on both sides. Use sales without sales tax. Use one full month at a time, so you can compare month to month.

What goes into the top of the formula

Count everything you pay because someone worked for you:

Two things get missed.

The first is the salaried manager who also works the line. Leave them out and labor looks lower than it is.

The second is your own pay. If you work 50 hours a week on the floor and draw nothing, put a wage on those hours in a side note. Otherwise the ratio flatters you.

Where to find each number

If your accountant books payroll differently from your payroll report, use the payroll report. It is the one you can pull tonight.

Worked example (fictional restaurant)

This is a made-up 70-seat full-service restaurant. The numbers are invented to show the math. They are not data from a real business.

| Line | Amount for the month | |---|---| | Total sales | $120,000 | | Hourly wages | $26,400 | | Manager salaries | $9,600 | | Employer payroll taxes | $4,500 | | Benefits | $3,300 | | Total labor | $43,800 | | Labor cost % | 36.5% |

Here is the trap. The owner of this restaurant looks at wages and salaries only:

The NRA medians include benefits, so the fair comparison is 36.5% against 36.5%. This restaurant sits exactly on the median for all full-service operators.

Now compare it with the profitable group. At 34.2% of $120,000, labor would be $41,040. This restaurant spends $43,800. The gap is $2,760 a month. It is not a disaster. It is a number you can act on, and about the size of one position on one slow shift, every shift, all month.

For wider context, Backbar Academy (2019) gives a full-service range of 30% to 40%. That source is older and less precise, so use it as background only.

Why labor cost drifts up

These are the causes I would check first when the ratio slips.

  1. The schedule follows last year, not this week. Sales dip in a slow month and the schedule stays the same. Labor % rises without anyone deciding it should.
  2. Nobody cuts on the slow shift. If the room is empty at 8 p.m., a full crew is a fixed cost for the next two hours.
  3. Overtime hides inside "wages." A few extra hours for several people add up. Most of it can be avoided with better shift swaps.
  4. Turnover. Black Box Intelligence (2025) reports hourly turnover of about 92% in full service. The same page says replacing one hourly employee costs about $2,706 in hard dollars: separation, replacement and training. That cost does not sit on the labor line, but you pay it.
  5. The wrong comparison. You measure wages only against a benchmark that includes benefits, and you think you are fine. You are not.

What I do this week

  1. Pull last month's payroll report. Add hourly wages, salaries, employer taxes and benefits into one total.
  2. Pull last month's sales without sales tax. Divide labor by sales.
  3. Write the result next to 34.2% and 36.5% (NRA, 2025). Note which side you are on.
  4. Look at your two slowest shifts last week. Count how many people were on. Cut one position on the slowest shift this week.
  5. List overtime hours by person for the last four weeks. Move one shift away from the person with the most.
  6. Repeat the calculation on the same day next month, so you compare like with like.

FAQ

What is a good labor cost percentage for a restaurant? For full-service restaurants, the NRA (2025) reports a median of 36.5% including benefits, and 34.2% for profitable operators. Use those two numbers as your reference points, not as a guarantee.

Should labor cost include benefits and payroll taxes? Yes, if you want to compare with the NRA figure, which includes benefits. Add employer payroll taxes too, so the number matches what you really pay.

Does labor cost include the owner's pay? Count it if it is a wage for work on the schedule. If you draw no pay, add a notional wage for your hours in a side note, so the ratio is not misleading.

Enter one month of labor and sales and see your labor cost percentage next to a sourced benchmark. Food cost, beverage cost and prime cost sit in the same view. The free calculator does this for one real month, using the inventory method, with colors against sourced benchmarks.

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Sources:

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Enter 10 numbers from last month: sales, inventory counts, purchases and labor. Get food, beverage, labor and prime cost, color-coded against sourced benchmarks. Excel and Google Sheets, no macros.

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