Restaurant labor cost percentage is calculated by dividing your total labor costs by your total revenue, then multiplying by 100. For example, if you spend $3,000 on labor in a week and bring in $10,000 in revenue, your labor cost percentage is 30%.

This calculator uses hourly rates and hours to estimate wage costs. In real life, total labor cost can also include payroll taxes and benefits. If you want to go deeper, your payroll reports can help you add those employer costs on top.

Regular labor cost is what you pay employees for hours worked up to 40 hours per week at their standard hourly rate. Overtime cost kicks in when an employee works more than 40 hours in a week—federal law in the U.S. requires you to pay at least 1.5 times their regular rate for those additional hours, though some states have daily overtime rules that are even stricter. Requirements vary by location—check your state and local regulations.

If overtime is popping up often, it’s usually a scheduling signal, not a payroll surprise. You can dig into rules and reminders on labor compliance, then tighten the schedule before you’re paying time-and-a-half by accident.

High labor costs in restaurants usually come from one of four places: too many hours scheduled relative to revenue, unplanned overtime, high turnover that drives up training and onboarding costs, or a mismatch between your busiest shifts and your staffing levels. Start by calculating your labor cost percentage for each day of the week separately—you’ll often find that one or two shifts are pulling the whole number up. From there, you can adjust scheduling to match your actual sales patterns rather than guessing.

The calculator focuses on direct wage costs—hourly rates and overtime—rather than total employer costs like payroll taxes, workers’ compensation, or benefits. To estimate total employer cost, use your payroll reports to add taxes and benefits on top of wages. If you want a clearer breakdown, an accountant can help you calculate your full labor burden.

Full-service restaurants typically run labor costs between 30% and 35% of revenue, and some fine-dining operations run even higher due to larger, more specialized teams. That said, 30–35% is a healthy target range—not a ceiling. If you’re consistently above 35%, the first place to look is overtime and over-scheduling on slower shifts. If you’re below 28%, it’s worth checking whether you’re understaffed in ways that affect service quality and staff retention.

Weekly is the minimum—monthly is too slow to catch problems before they affect your bottom line. Many operators track labor cost percentage daily during high-volume periods like holidays or special events, when overtime and extra shifts can spike unexpectedly. The goal is to compare your actual labor spend against your projected revenue for the same period, so you can make scheduling adjustments in real time rather than after the fact.

The calculator is designed to give you a snapshot for a single location or a single scheduling period. If you operate multiple locations, you’d need to run the calculator separately for each one and compare results. If you want to estimate potential savings from improving scheduling and reducing overtime, try the ROI calculator next.