How it works
Labor cost percentage shows how much of every sales dollar goes to paying the people who run the store. It's usually one of the biggest controllable costs a store has, which makes it one of the most watched numbers.
Example. In a week, a store pays $6,300 in labor (wages plus payroll taxes and benefits) and sells $42,000.
Labor cost is 15.0% of sales. Staff worked 400 hours, so the store sold $105 per labor hour at an average cost of $15.75 an hour.
Against a 14% target, the budget was $5,880, so the week ran $420 over.
Count the full cost of labor
Wages alone understate what labor costs you. Include employer payroll taxes, workers' compensation, and any benefits you pay, so the percentage reflects what actually leaves your bank account. Use the same definition every week so the trend means something.
Two numbers are better than one
Labor percentage moves with sales, so a slow week makes it jump even when you scheduled tightly. Sales per labor hour helps separate the two. If sales per labor hour holds steady but labor percentage rises, the issue is sales, not scheduling.
When you're building a schedule, work backward: multiply forecast sales by your target percentage to get the week's labor budget, then divide by your average cost per hour to get the hours you can schedule.
Common questions
- What's a good labor percentage?
- It depends heavily on the format. A store with a kitchen or made-to-order food needs more labor per sales dollar than one that mostly sells packaged goods, and fuel sales add revenue with little labor. Compare against your own history and similar stores rather than a single number.
- Should owner hours count?
- If you work in the store without a salary, your hours don't show up as cost, which flatters the percentage. Track them separately so you know what it would cost to replace yourself.
Last updated October 11, 2026.