Labor cost percentage

By Marji · Updated September 29, 2026 · Sources and editorial policy

Also called: labour cost percentage · labor cost %

Labor cost percentage is total labour cost divided by total sales. Total means fully loaded: wages, salaries, payroll taxes, workers' compensation and benefits. In accommodation and food services, everything employers paid on top of wages — payroll taxes, workers' compensation, insurance, paid leave and other benefits — averaged 23.8% of wages in June 2026 (BLS), so leaving it out understates the number badly.

Formula

Labor cost % = Total loaded labor cost ÷ Total sales × 100

Worked example · Loaded vs. unloaded on one hypothetical month

Gross wages and salaries: $52,800
Employer Social Security and Medicare on wages: $4,039.20
Employer Social Security and Medicare on $28,000 of reported tips: $2,142
Workers' compensation (assumed): $1,600
Benefits (assumed): $2,400
Total loaded labour: $62,981.20
Sales: $192,000
Labor cost: 32.8% (vs 27.5% unloaded)

5.3 points of difference, in a month after every employee has passed the unemployment-tax wage bases; early in the year FUTA and state unemployment tax add more. The labor cost guide shows both months.

Published medians, 2024 — National Restaurant Association, 2025 Restaurant Operations Data Abstract (not standards or goals)
Format	Median salaries and wages incl. benefits, % of sales
Full service	36.5%
Limited service	31.7%

Read it alongside food cost, never alone. The two trade constantly — see prime cost for the worked example of why.

Run the numbers

Labor cost percentage calculator

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The guide that works it through

Restaurant Labor Cost Percentage: What to Include and How to Calculate It

Calculate restaurant labor cost percentage with the right inclusions — payroll taxes, tips, service charges, benefits — using 2026 federal and New York figures and published benchmarks.

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