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How do I calculate labour cost percentage in a hotel or restaurant?
Labour cost percentage is total labour cost divided by total revenue for the same period, multiplied by 100. Include wages, overtime, employer contributions, benefits and, where used, agency or casual staff, so the figure reflects the full cost of labour.
It matters because labour is typically one of the largest controllable costs in hospitality.
Commonly misread:
- Leaving out management salaries or agency costs, which understates the real figure.
- Matching costs to the wrong revenue period, such as payroll cycles that do not match calendar months.
- Treating a falling percentage as success when it comes from understaffing that hurts service.
Track it daily or weekly against actual covers or occupancy, as well as monthly. Labour hours per occupied room or per cover gives additional, more operational insight.
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