Ask ten hospitality operators what their labour cost percentage should be and you will get ten different answers, and all ten of them could be right for their own business. Labour cost as a percentage of revenue depends on your service style, your margins on food and drink, your rent, and what “labour cost” even includes once you factor in on-costs like employer’s National Insurance and pension contributions. There is no universal target hiding in an industry report that applies cleanly to your venue.
That is not a dodge. It is the honest starting point, and it is also, usefully, how the tools for managing it are actually built: around a target you set, not one imposed on you.
Why a single benchmark number doesn’t help much
You will sometimes see a figure quoted along the lines of “labour should be a quarter to a third of revenue.” Treat that kind of number as a loose, commonly-cited reference point at best, not a rule. A high-volume counter-service cafe with a small kitchen and a tight menu can run a very different labour percentage to a full-service restaurant with a la carte cooking and table service, and both can be perfectly healthy businesses. A venue with strong drink margins can often afford to carry a higher staffing cost than one running on thin food margins alone. Trying to hit someone else’s number, rather than a number derived from your own P&L, tends to lead to one of two outcomes: chronic under-staffing that costs you covers and service quality, or a target so loose it never actually constrains anything.
Work out your own target from your own numbers
The more useful exercise is working backwards from your own figures. Start with your gross margin on food and drink, subtract your fixed costs, your rent, utilities, insurance, licensing, and whatever profit margin you need the business to hold, and what’s left is roughly what you can afford to spend on labour as a share of revenue. That is the number worth setting as your actual target, not a figure borrowed from a blog post (including, to be clear, this one).
It is also worth deciding upfront what counts. Base pay is the obvious component, but on-costs (employer’s NI, pension contributions, any holiday pay accrued for irregular-hours staff) add a meaningful amount on top of headline hourly rates, and a target that only accounts for base pay will consistently look better than reality.
Once you have a number, the job becomes tracking against it week by week, and adjusting it as your business changes rather than treating it as fixed forever.
Setting and tracking your target in AutaRota
AutaRota lets you set a labour cost target as a percentage on your company settings, so it’s a single number you define once and can revisit whenever your margins change. That target then shows up where it’s actually useful: in the rota builder, alongside the rota you’re currently staffing.
As you assign shifts, a cost summary panel tracks estimated hours and cost for the week in real time, broken down by day, by position, and by individual staff member, next to your target percentage. You can see at a glance whether Saturday’s staffing plan is going to blow the week’s budget before you’ve published anything, rather than finding out after the fact when the numbers land in payroll. It also flags anyone scheduled meaningfully over their contracted hours, which is often where labour cost creep actually comes from: not from headline rates, but from overtime accumulating quietly across a few people every week.
This only works, worth saying plainly, if your team’s hourly rates are recorded accurately and kept up to date. A cost summary built on stale rates will tell you a comforting number that isn’t true. It is also an estimate built from scheduled hours, not a replacement for what payroll and your management accounts eventually report; use it to catch problems while you can still act on the rota, not as your final source of truth on actual spend.
The real value is catching drift early
The point of tracking labour cost against a target isn’t to hit a magic number for its own sake. It’s to catch drift while a rota is still a draft, when a swap, an extra cover for a big table, or a shift added late is still easy to see and easy to adjust, rather than after the week has happened and the only thing left to do is explain it. A rota that’s slightly over target because Friday genuinely needed the extra pair of hands is a reasonable trade-off. A rota that’s over target because nobody was watching until the invoice arrived is the pattern worth breaking.
If you’re weighing this up against what AutaRota costs, AutaRota’s FAQ covers billing and plan limits.