Labour cost percentage is the total cost of staff expressed as a percentage of sales over the same period. If a café spends $3,000 on wages in a week and takes $10,000, labour is 30 per cent of sales.
It is calculated from payroll or rostered costs divided by POS sales. Costs should include the full cost of employment, such as superannuation, penalty rates and leave loading, to give a realistic picture. Many businesses track both planned (rostered) and actual labour.
Hospitality and retail managers use it to keep payroll aligned with demand. Combined with visitor counts and hourly sales data, it shows whether staffing is too heavy in quiet hours or too thin at peaks. Targets vary widely by business type, trading hours and award obligations, so each business should set benchmarks based on its own history.
A low percentage is not always good. Cutting hours at busy times can lose sales and wear out the team, while a high figure on a quiet day may be unavoidable. Look at it by day and by hour, not just weekly totals, and consider service quality and conversion alongside it.
Keeping labour in line with real traffic is one of the most direct ways to protect margin.