What Is the Biggest Driver of High Labour Cost in Restaurants?
The most common cause of excessive restaurant labour cost is a roster template that doesn't match actual trading patterns. Shifts that start too early before the lunch rush, full coverage during the mid-afternoon lull, and identical Saturday and Sunday templates despite very different trading volumes all add up to systematic overstaffing — paying for coverage the business doesn't need, while often being understaffed during peak service.
Labour is typically the second-largest cost in a restaurant after food, and unlike food cost, it's directly controllable through the roster. A restaurant running at 38% labour cost when its category benchmark is 28–32% isn't suffering from paying too much per hour — it's rostering too many hours at the wrong times. This guide covers the principles and practical steps for bringing restaurant labour cost under control.
Understanding Your Labour Cost Percentage
Labour cost percentage (LCP) is total labour cost divided by total revenue for the same period, expressed as a percentage. Include all labour — not just floor staff wages, but kitchen, management, and any payroll-adjacent costs like superannuation. Tracking this weekly, rather than monthly, gives you a real-time signal before a bad week compounds into a bad month.
Set a target LCP before you build each week's roster and compare the projected cost against that target before publishing. This is the single highest-leverage habit change a restaurant manager can make — it transforms the roster from a staffing document into a cost management tool. For the broader principles of cost-conscious rostering, see our guide on 5 roster hacks for managers.
The Restaurant Industry Award: What Matters for Rostering
Most restaurant staff are covered by the Restaurant Industry Award 2020. The key rostering provisions are:
- Minimum engagement: 2 hours for casuals
- Evening rates: Penalty applies after a certain time (check current Award for threshold — it varies by classification)
- Saturday: 125% (permanent), 150% (casual)
- Sunday: 175% (permanent), 200% (casual)
- Public holidays: 250% (permanent), 275% (casual)
- Split shift allowance: Applies when broken time between segments exceeds the Award threshold
Aligning Covers Data to Shift Patterns
Covers data — the number of guests served by time period — is your most valuable rostering input. Pull eight weeks of covers data from your POS or reservation system, broken down by service period (lunch, dinner) and day of week. Then map your current shift patterns over the top. In almost every restaurant, this analysis reveals at least two or three systematic mismatches between when staff are rostered and when the business actually needs them.
The most common patterns: Fridays and Saturdays are staffed the same despite very different trading volumes. The 4pm–6pm quiet window has the same coverage as the 7pm–9pm dinner peak. The Sunday lunch shift is over-covered relative to actual covers. Each of these is a direct labour cost reduction opportunity that doesn't require cutting anyone's hours — it requires redirecting them.
Managing Split Shifts and After-Midnight Labour
Restaurants that run lunch and dinner service have a natural split-shift structure. The cost question is whether it's cheaper to use split shifts (two separate shift segments per employee) or to stagger starts and carry some staff through the afternoon quiet period. The answer depends on your specific Award, the split shift allowance threshold, and how many staff you need for both services. Model both approaches on paper before committing to a structure. For a detailed comparison relevant to hospitality, see our guide on hospitality scheduling software.
Frequently Asked Questions
What is a good labour cost percentage for a restaurant?
The target for full-service restaurants is typically 25–35% of revenue. Quick service and fast casual operations aim for 20–28%. Fine dining is often 30–35% due to higher skill requirements. If your labour cost consistently exceeds 38%, the roster structure needs attention before pricing or margin improvements will make a meaningful difference.
What Award covers restaurant employees in Australia?
Most restaurant employees are covered by the Restaurant Industry Award 2020, which sets minimum pay rates by classification level, penalty rates for evening, Saturday, Sunday, and public holiday work, overtime thresholds, split shift allowances, and a minimum 2-hour engagement for casual staff.
How do I calculate my restaurant's labour cost percentage?
Divide total labour cost (wages, superannuation, payroll tax) by total revenue for the same period, multiplied by 100. Track weekly: total wages paid divided by total weekly revenue. Include all casual, part-time, and full-time labour — not just floor staff.
What is the most effective way to reduce labour cost without cutting service quality?
Align shift patterns to covers data. Identify which time windows are systematically overstaffed and redistribute those hours to peak service periods. This reduces labour cost without cutting total hours, preserving service quality during the periods that generate the most revenue.
Track Labour Cost as You Build the Roster
GetMyRoster shows your projected labour cost in real time as you schedule shifts — so you can hit your weekly target before the week starts, not after the payroll comes in.
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