Labour cost percentage for pubs and restaurants: how to calculate and control it
Labour cost percentage is your total labour cost divided by net sales (excluding VAT) for the same period, multiplied by 100. Include wages, salaries, holiday pay, employer National Insurance and employer pension, not just hourly pay. Many UK pubs and restaurants work to a rule of thumb of roughly 25% to 35%, lower for wet-led pubs and higher for food-led and fine dining, but your own weekly trend matters more than any benchmark.
On this page
Labour is the cost you can change fastest. You can't renegotiate your rent this week, and your brewery or food supplier prices are what they are, but the rota you publish on Wednesday decides next week's wage bill. Labour cost percentage is the number that tells you whether that rota made sense.
The formula
Labour cost % = total labour cost ÷ net sales × 100
- Total labour cost is everything it costs you to employ people for the period (see below), not just the hourly pay on the rota.
- Net sales is your takings excluding VAT, for the same period.
Work it out weekly. Monthly is too slow to act on, and daily figures jump around too much on their own (though they're useful alongside the weekly number).
What to include in labour cost
| Include | Notes |
|---|---|
| Hourly wages | All hours worked, at the rate paid |
| Salaries | GM, assistant managers, head chef: divide annual salary by 52 for a weekly figure |
| Holiday pay | Accrued or rolled-up holiday pay for casual staff; it's a real cost even when nobody is on holiday this week |
| Employer National Insurance | 15% on each employee's earnings above £96 a week (£5,000 a year) for 2026 to 2027 |
| Employer pension | Minimum 3% of qualifying earnings for auto-enrolled staff |
| Overtime and premiums | Bank holiday rates, split-shift premiums, any extras |
Things that are usually left out: tips and troncs (they're customers' money passed on to staff, not your cost), recruitment, staff food and uniforms. Whatever you decide, be consistent so this week compares with last week.
A few useful figures for 2026 to 2027
- National Living Wage (21 and over): £12.71 an hour from April 2026, up 4.1% from £12.21. The 18 to 20 rate is £10.85, and the under-18 and apprentice rate is £8.00.
- Employer National Insurance: 15% above the secondary threshold of £96 a week. For employees under 21, employer NI isn't due until earnings reach the upper secondary threshold of £967 a week. That's more than 75 hours' pay even at £12.71 an hour, so it's worth knowing the ages of your team when you estimate on-costs.
- Employment Allowance: eligible employers can reduce their employer NI bill by up to £10,500 for 2026 to 2027.
- Pension: auto-enrolment minimum is 8% of qualifying earnings in total, of which the employer pays at least 3%. Qualifying earnings are those between £6,240 and £50,270 a year.
- Holiday pay for casual staff: irregular-hours and part-year workers accrue holiday at 12.07% of hours worked, or can be paid rolled-up holiday pay of 12.07%. Our holiday pay guide explains when each applies.
A worked example: a 40-cover gastropub
A food-led village pub, one week in October. The figures are illustrative.
| Line | £ |
|---|---|
| Hourly-paid wages, including holiday pay | 5,400 |
| Salaried GM and head chef (weekly share) | 1,420 |
| Employer National Insurance (estimate) | 600 |
| Employer pension (estimate) | 120 |
| Total labour cost | 7,540 |
| Net sales (excluding VAT) | 22,000 |
| Labour cost % | 34.3% |
If the same pub had only counted hourly wages against sales including VAT (£26,400), it would have reported 20.5%, and thought it had plenty of room. That's the most common way labour percentage gets flattered.
What's a "good" labour percentage?
There's no official benchmark, and anyone who gives you a single number without knowing your business is guessing. As a rule of thumb used across UK hospitality:
- Many pubs and restaurants work to somewhere in the region of 25% to 35% of net sales.
- Wet-led pubs tend to sit at the lower end, because drinks take less labour per pound of sales than food.
- Food-led pubs, restaurants and cafés tend towards the higher end, because cooking and table service take more people.
- Fine dining, with higher staff ratios and skilled kitchens, often runs higher still.
More useful than any benchmark: your own trend, and your own number by day and session. A labour percentage that creeps up two points over a quarter is a warning, whatever the absolute figure.
Look at sales per labour hour too
Labour percentage tells you the overall picture. Sales per labour hour (net sales ÷ hours worked) shows you where the waste is.
| Session | Net sales | Staff hours | Sales per labour hour |
|---|---|---|---|
| Tuesday lunch (12:00-15:00) | £600 | 12 | £50 |
| Tuesday afternoon (15:00-17:30) | £150 | 7.5 | £20 |
| Tuesday evening (17:30-23:00) | £1,800 | 27.5 | £65 |
That Tuesday afternoon is where the money goes: three people on for two and a half hours to take £150. A split shift or a staggered finish would fix it without touching the evening.
What the 2026 wage rise did to your labour cost
The National Living Wage went up 50p an hour in April 2026. For a pub with 400 hours a week of staff aged 21 and over on the minimum rate, that's £200 a week, or £10,400 a year, before employer NI and pension. If your prices didn't move, your labour percentage did. It's worth recalculating your target after every April rise rather than carrying the old one forward.
How to control labour cost through the rota
1. Build the rota from trade, not habit
Pull sales by hour or session for the last four weeks and staff to it. Our guide on how to write a pub rota goes through the process step by step.
2. Stagger start and finish times
Instead of three people starting at 5pm, start one at 5pm, one at 6pm and one at 7pm to match how the evening builds. Same for finishes: the last hour after food stops rarely needs a full team.
3. Use split shifts where they genuinely help
A lunch-and-dinner split avoids paying for a dead afternoon. Done fairly, staff don't mind. See our guide to split shifts.
4. Cross-train
A bartender who can run food at lunch, or a cook who can wash up for the last hour, gives you flexibility without an extra body.
5. Plan for events, don't react to them
If you know Saturday has a match and a party, staff up for it in advance and run lighter on the quiet days around it. Calling people in at short notice usually costs more.
6. Check the cost before you publish
The cheapest time to fix a rota is before it goes out. Total the hours and cost for each day and compare with what you expect to take.
7. Don't cut so hard that sales fall
An under-staffed Friday where tables wait 20 minutes for a drink costs you more in lost sales and reviews than the extra shift would have. Labour percentage is a ratio: cutting labour on your busiest night can make it worse.
Common mistakes
- Using sales including VAT.
- Leaving out salaried staff, NI, pension or holiday pay.
- Comparing a bank holiday week with an ordinary week.
- Judging a quiet week by the same target as a busy one, when salaried staff are a fixed cost.
- Only looking monthly, when the rota is weekly.
- Treating the target as the goal, rather than profit and good service.
Labour cost checklist
- Net sales (ex VAT) for the week from the till
- Hourly wages, salaries, holiday pay, employer NI and pension all included
- Labour % calculated weekly and tracked over time
- Sales per labour hour checked by session for dead spots
- Target reset after the April wage rise
- Rota costed before it's published
How ShiftComplete helps
ShiftComplete shows labour cost while you build the rota, so you see the effect of adding or removing a shift before anything is published. It builds a draft rota from staff availability and the events you add (for example "+2 on the bar for Saturday's match"), and you drag shifts around to shape the week. Split shifts can have up to four time blocks per person per day, each tagged with an area, which makes staggered starts and lunch-and-dinner splits easy to lay out. It doesn't connect to your till or payroll, so take your net sales from your till report and compare.
Frequently asked questions
What is a good labour cost percentage for a restaurant?
There's no official figure. A commonly used rule of thumb in UK hospitality is roughly 25% to 35% of net sales, with food-led restaurants and fine dining towards the top or above it because they employ more kitchen and service staff per pound of sales. Track your own number weekly and compare like with like rather than chasing someone else's benchmark.
What is a typical labour cost percentage for a pub?
As a rule of thumb, wet-led pubs usually run a lower labour percentage than food-led pubs, because pulling a pint takes less labour per pound than cooking and serving a meal. A food-led gastropub's labour percentage will look more like a restaurant's. Work out your split of wet and food sales and set your target from your own figures.
Should labour cost be calculated on sales with or without VAT?
Without. VAT isn't your money; it goes to HMRC. Calculating labour against sales including VAT makes your labour percentage look lower than it really is. Use net sales from your till report, and be consistent week to week, so this week's figure can be compared fairly with last week's and last year's.
Do I include salaried managers and the head chef in labour cost?
Yes, for a true picture. Salaried staff are often the biggest single labour cost in a small venue. Some operators also track hourly-paid labour separately, because that's the part the rota controls week to week. Either way, include employer National Insurance, pension contributions and holiday pay, not just gross pay.
Sources
- National Minimum Wage and National Living Wage rates: GOV.UK
- LPC recommendations take the National Living Wage to £12.71: GOV.UK
- Rates and thresholds for employers 2026 to 2027: GOV.UK
- Workplace pensions: what you, your employer and the government pay, GOV.UK
- Holiday pay and entitlement reforms from 1 January 2024: GOV.UK
Checked 24 October 2026. This guide is general information, not legal advice.