Restaurant Labor Cost Calculator

Restaurant labor cost is what it costs to employ the people who run the restaurant, and “what it costs” has three levels that are easy to mix up. Two owners can quote different labor cost percentages for the same month simply because one counted payroll taxes and the other did not.

In the Labor Studio these are three separate entries. Positions give the gross wages, the Employer costs section gives the rest, and the result shows the three levels one under the other. If you leave the employer costs empty, the total is shown as incomplete: it is gross wages only, and lower than your real labor cost.

The line cooks are paid for 110 regular hours and 10 overtime hours each at $18.00: 3 × 110 × $18 = $5,940 of regular pay, plus 3 × 10 × $18 × 1.5 = $810 of overtime pay, which makes $6,750. Servers are 6 × 80 hours at a $12.50 cash wage, dishwashers 2 × 100 hours at $15.00, and the two managers are paid $3,125 each for 105 hours each. Gross wages are therefore $22,000.

The employer costs are the three entries typed for the example: 8% of gross wages in payroll taxes ($1,760), $900 of benefits and insurance and $340 of other employer costs, $3,000 in all. Total labor cost is $25,000: 25.0% of sales, with 1,250 paid hours, SPLH of $80.00 and a cost per labor hour of $20.00. The employer costs are spread over the positions in proportion to their gross wages, an arithmetic allocation and not a measurement of what each position really costs the business.

In the Labor Studio, the Labor cost tab shows exactly this table, the three levels of labor cost and a bar chart with the same figures as a text list. To see the total next to your other costs, enter it as the Labor cost in the Restaurant Profit Calculator; its prime cost section explains how labor combines with food cost, and the Profit and Prime Cost Guide defines each figure and reads an invented month.

Employer costs are the labor costs that do not appear on an employee’s gross pay. Depending on your state, your business and what you offer, they can include the employer share of Social Security and Medicare taxes, unemployment taxes, workers’ compensation insurance, employer-paid benefits, and costs such as uniforms or training. The IRS explains the employer and employee shares of Social Security and Medicare taxes in Publication 15 (Circular E), Employer’s Tax Guide (2026 edition, page read on October 12, 2026). Your payroll provider or accountant can tell you the rates that apply to you.

The Labor Studio does not suggest a rate. It has three entries: employer payroll taxes as a percentage of gross wages, benefits and insurance in dollars, and other employer labor costs in dollars. Type what you actually pay. If you leave all three empty, the result is labelled Total labor cost (incomplete) and says the total is gross wages only. If you leave some empty, the result lists which ones were counted as $0.

Decide once which employer costs belong in “labor,” write it down, and keep it the same from month to month. That matters more than the choice itself: a labor cost percentage can only be compared with your own earlier figures if both were built the same way.

Labor cost % is a ratio of two things, and so a change in it has two possible causes. Because labor cost % equals the cost per labor hour divided by SPLH, it can fall when sales per hour rise, when the cost of an hour falls, or both. It can also stay flat while both move. Looking at the percentage alone cannot tell you which happened; the three figures together can.

• SPLH moves, cost per hour does not. Sales rose or fell against the same hours, or hours changed against the same sales. The Studio’s What-if tab shows each effect separately.
• Cost per hour moves, SPLH does not. Pay rates, overtime, the mix of positions or employer costs changed. The overtime share and premium in the Labor cost result show how much of it is overtime.
• Both move. Compare the schedule you ran with the one you are considering in the Compare schedules tab and read the three figures side by side.

None of these figures says whether a number is right for your restaurant. SPLH measures sales set against paid hours, not service quality, and a lower labor cost % can come with slower service or a thinner team. There is no universal percentage or SPLH to aim for: they depend on your concept, menu, hours and wages, and this calculator uses no outside comparison. Use your own earlier periods, defined the same way, as the reference.

1. Write schedule A as it is. Enter the positions, hours, rates and employer costs you actually have: that is your reference.
2. Describe schedule B by what differs. In the Compare schedules tab, an empty field keeps A’s value. You can change a position’s employees, hours, overtime, rate or pay; remove a position in B only; or add a position only in B. Editing B never changes A.
3. Read the same four figures for both: total labor cost, labor cost %, SPLH and cost per labor hour, with paid hours and overtime beside them.
4. Say what B assumes. Sales in B are the ones you type, or A’s. B does not predict that guests will come or that service will hold.

In B, the 2 dishwashers (200 hours, $3,000 of gross wages) are removed and 2 hosts are added at 60 hours each and $14.00 an hour (120 hours, $1,680). Total labor cost falls by $1,425.60, to $23,574.40, because payroll taxes follow wages at the typed 8%. Labor cost % falls to 23.6% and SPLH rises to $85.47 because there are 80 fewer paid hours against the same sales, while the cost per hour edges up to $20.15 because the new hours are paid more than the removed ones. Whether somebody still washes the dishes is a question the arithmetic cannot answer.

A labor cost % goal turns into a budget in dollars: budget = goal % × sales. The goal is yours; the calculator suggests none. With a 22% goal on $100,000 of sales, the budget is $22,000, and the example’s $25,000 is $3,000 over it. At today’s labor cost, sales would have to be $25,000 ÷ 0.22 = $113,636.36 (13.6% more) to meet that goal.

The hours that would fit are the less obvious part, because not every labor dollar moves with hours. In the example, the hourly positions’ gross wages and the payroll taxes on them ($15,750 × 1.08 = $17,010) move with hours, while the managers’ pay and its taxes, the benefits and the other employer costs ($7,990) do not. The budget leaves $22,000 − $7,990 = $14,010 for hourly labor, which is 82.4% of today’s $17,010, so the hourly positions’ 1,040 hours would become 856.58, 17.6% fewer, if rates, the overtime share and the tax rate stayed the same. If the budget is lower than the fixed labor, the Studio says that hours alone cannot reach it instead of showing a number.

An SPLH goal gives hours: paid hours = sales ÷ goal. A goal of $90 per labor hour on $100,000 of sales matches 1,111.11 paid hours, 138.89 fewer than today, which at today’s $20.00 average cost per hour would cost $22,222.22, or 22.2% of sales.

This is the Labor target tab. It is arithmetic on your goal and your figures, not a recommendation to change anyone’s hours, and it does not check service levels, capacity or legal requirements. To see whether a sales level fits your room, use the Table Capacity Calculator; to find the sales at which all your costs are covered, the Break-Even Calculator.