Labour cost percentage: the formula and honest benchmarks
Labour cost percentage is the one number that tells you whether the roster fits the business: total labour cost divided by revenue, over the same period.
The formula, done properly
Labour % = (wages + superannuation + leave accruals + payroll costs) ÷ revenue × 100. The common mistake is counting only gross wages. Super, leave loading, workers' comp and payroll tax are all labour; leaving them out flatters the number by several points and makes every benchmark comparison wrong. Count salaried managers too — a venue that "hits 25%" by leaving the owner's 60 hours out hasn't hit anything.
Benchmarks, with their caveats
There is no official Australian benchmark — treat anyone quoting one decimal place with suspicion. The bands Australian operators and industry guides commonly work to:
| Format | Typical labour % |
|---|---|
| Cafe / quick service | 20–25% |
| Full-service restaurant, bar | 25–30% |
| Fine dining | 27–32% |
Many operators steer by prime cost instead — labour plus food and beverage cost — aiming for roughly 60–65% of revenue. That's often smarter: it stops you "fixing" labour by pushing work into wastage, or vice versa. Beware US benchmarks: tipping shifts wages off the employer there, so American numbers run lower than anything achievable here.
How to actually move the number
- Price the roster before publishing. The cheapest hour to cut is one that hasn't been worked. If your builder shows the week's cost as you place shifts — Rostru does this per shift, day and week — you trim drafts, not people's published plans.
- Cut where the multipliers are. An hour off Sunday is worth 1.75 casual weekday hours — the penalty-rate table is your map of where the money is.
- Match starts to demand, not to habit. Three people at 8am because it's always been three people at 8am is how quiet Tuesdays stay expensive. Stagger starts against the actual curve.
- Make the hours real. Paid-but-not-worked minutes inflate the numerator invisibly — verified clock-ons are how the number becomes true.
- Watch it weekly, not at BAS time. A quarter is twelve rosters too late.
One warning: the number can be too low. Chronic understaffing reads as efficiency right up until service quality, reviews and staff turnover bill you for it. The benchmark is a band, not a floor to dig under.