Find the true annual and hourly cost of an employee — wages, absences, and extras included
💡 Why This Matters The number on a paycheck isn't the real cost of an employee. Add in absences, taxes, benefits, and overtime, and the true hourly cost can look very different — this calculator gets you the full picture in one pass.
Restaurant labor cost percentage typically runs 25–40% of revenue — fine dining tends to sit at the higher end since more staff are needed per customer served.
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Start with gross pay: hours worked per week × 52 weeks gives gross hours per year, multiplied by the pay rate. Next, subtract hours lost to absences (absent days × daily hours) to get net hours actually worked. Add any additional annual costs — taxes, benefits, overtime, supplies — to gross pay to get the annual payroll labor cost. Divide that by net hours worked to get the true hourly labor cost, and divide by revenue for labor cost as a percentage of sales.
The hourly labor cost is almost always higher than the quoted pay rate, because it spreads fixed annual costs and lost time over fewer actually-worked hours. Labor cost percentage tells you how much of every revenue dollar goes to paying your team — useful for pricing, budgeting, and comparing against industry norms.
This calculator assumes a single employee type with consistent hours and pay — for a full team, you'd run this per role and sum the results. It also doesn't account for payroll tax brackets or benefit costs that scale with salary; treat "additional costs" as your best estimate of everything beyond base pay.
Use the hourly labor cost when pricing jobs or services so you don't underquote based on the sticker pay rate alone. Compare your labor cost percentage to your industry's typical range — restaurants generally target 25–40% — to see whether staffing costs are in a healthy zone relative to revenue.
Example: An employee works 40 hrs/week at $10/hr → 2,080 gross hours/year → $20,800 gross pay. They're absent 15 days/year at 8 hrs/day → 120 hours not worked → 1,960 net hours worked. Add $3,900 in additional costs → $24,700 annual payroll labor cost. Divide by 1,960 net hours → $12.60 hourly labor cost. Against $80,000 in revenue, that's a 30.9% labor cost percentage.
Multiply gross hours per year by pay rate to get gross pay, subtract hours lost to absences to get net hours worked, add any additional annual costs like taxes and benefits, then divide the total by net hours worked to get the true hourly labor cost.
Between 25% and 40% of gross revenue, depending on the type of restaurant. Fast-service restaurants tend to run lower, while fine dining tends to run higher because more staff are needed per customer.
It can be either. Base salaries are typically fixed costs, while things like overtime and commissions are variable costs that scale with hours worked or output.
Common additional costs include payroll taxes, health insurance, benefits, overtime pay, sick and vacation pay, meals, supplies, and training costs — anything beyond the base gross pay that the employer covers.