Labour cost percentage is the most important number on your operating statement that most managers don't track weekly. They check it monthly, notice it's high, and have no idea which shifts drove it there.
The formula is simple. The discipline is harder.
The Formula
Labour cost % = (total wages / total revenue) × 100
If you paid €3,200 in wages last week and took €11,000 in revenue, your labour cost is 29.1%.
Include everything in wages: hourly pay, salaries, employer social contributions, paid leave payouts, and sick days covered. Leave out contractor invoices unless those contractors replaced a role that would otherwise be a staff position. If you only track gross pay, you'll undercount by 15-25% depending on your social contribution rate.
Industry Benchmarks
Restaurants and cafes: 25-35%. Above 35% usually signals either prices are too low or scheduling is too loose - or both.
Retail: 15-20%. Retail runs leaner because the physical product carries more of the revenue weight. Service-heavy retail (electronics, furniture with advisors) sits at the higher end.
Salons and barbershops: 45-55% if stylists are on commission. 30-40% if salaried. Commission structures shift income risk to staff and keep your fixed wage costs lower, but total payout can climb on high-revenue weeks.
Benchmarks are context-dependent. A high-end restaurant with €90 average covers and premium-paid staff can run at 38% and stay profitable. A discount retailer at 22% might be losing money on tight margins. The benchmark tells you where to start looking, not what the verdict is.
Tracking Per Shift vs Monthly
Monthly tracking tells you there's a problem. Shift-level tracking tells you where.
If your overall labour cost is 32% but your Tuesday lunch shift runs at 51% because you scheduled 4 staff for a slow service, that's an actionable finding. Monthly averages hide it.
Track at minimum weekly, broken down by day or shift type. After 4-6 weeks, patterns emerge. You'll see which shifts consistently overspend relative to revenue. Some findings are obvious in hindsight - the Sunday evening shift with 3 staff for low footfall, the Monday morning with full crew for a slow open.
Once you know where the cost lives, you can address it with scheduling changes rather than guessing.
What Drives Labour Cost Up
Overstaffing slow periods. One extra person for a 4-hour shift adds roughly €30-50 to costs. Across a week of slow shifts, that accumulates fast. This is the most common driver and the most correctable.
Unplanned overtime. When someone calls sick and you cover with overtime, the hourly rate jumps to 1.5x. A single overtime shift on a short-staffed day adds €40-80 in premium costs. Tight on-call arrangements reduce how often this happens.
High turnover. Onboarding a new staff member costs 20-40 hours of paid time across training, shadowing, and supervision before they're fully productive. If you turn over 4 people per year on a team of 10, that's 80-160 hours of reduced-output wage cost annually. Turnover shows up in labour cost - it just hides inside training hours.
Long paid breaks on short shifts. A 30-minute paid break on a 4-hour shift represents 12.5% overhead on that worker's productive time. Some operations can restructure break rules for shorter shifts without violating labor law minimums - worth checking with an employment lawyer.
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