Wage cost percentage for a restaurant or café: how to work it out and bring it down without wrecking service

Wage cost percentage is your total labour cost for a period divided by your sales excluding GST for that same period. Count gross wages, super, workers compensation, leave loading and payroll tax where it applies, plus a fair wage for your own shifts. Add your food cost and you have prime cost, the number that decides whether a venue earns money. Set your target from your own figures, then check it every week.

That’s the formula. The useful part is what goes into it, because most owners we’d talk to are under-counting, and the gap is bigger this year than it was last.

What counts as labour cost, and what do owners forget?

The number on the payroll report is only the start. A true wage cost percentage for an Australian venue includes:

• Gross wages for every hour paid, including prep, close and training shifts, not just hours on the floor.
• Super. The guarantee rate is 12%, and under Payday Super it’s now calculated on “qualifying earnings”, which take in ordinary time earnings and commissions.
• Workers compensation. Your premium is built on wages, so it rises as the roster does.
• Leave accruals and leave loading for permanent staff, which the cash payroll doesn’t show until someone takes a fortnight off.
• Payroll tax, only if you’ve passed your state’s threshold (more on that below).
• Your own shifts. If you’re on the machine or the pass because it’s cheaper than hiring, cost your hours at what a competent replacement would be paid.

Sales are the other half. Use takings excluding GST. Including it makes your wage percentage look about a tenth better than it is, which is a nice feeling that lasts until the BAS.

How do you calculate it? A worked example

An illustrative week for a 60-seat restaurant (the numbers are made up, the method isn’t):

Line	Amount
Sales excluding GST	$24,000
Gross wages (all staff)	$7,200
Super at 12%	$864
Workers comp allowance for the week	$200
Total labour	$8,264
Wage cost percentage	about 34%
Food and drink cost at 30% of sales	$7,200
Prime cost	about 64%

At 64% prime cost, 36 cents of every sales dollar is left for rent, utilities, insurance, card fees, repairs, loan repayments and profit. If rent and outgoings take 12 cents and everything else another 15, you’re making about 9 cents on the dollar before tax. A two-point wage blow-out takes more than a fifth of that profit. That’s why this is the number to look at first.

Run the same calculation for your quietest and busiest weeks as well as an average one. The average hides the problem, which is usually a handful of weeks where the roster ran ahead of the customers. Our guide to menu costing covers the food-cost half of prime cost in the same way.

What changed with Payday Super?

Two things, and neither changes your total labour cost much. Both change when the cash leaves.

Payday Super began on 1 July 2026. Instead of paying super quarterly, employers now generally need super to reach each employee’s fund within seven business days of payday, and the ATO’s Payday Super guidance and the Fair Work Ombudsman both set out the details. The old late-payment offset, which let you count a late payment toward the quarter, is gone.

For a venue that means a 12% slice of the wage bill leaves your account every pay cycle. Under the old rhythm, the money sat in your account for up to three months and covered a quiet week. Now it can’t. That’s why owners who run weekly or fortnightly pay cycles feel the squeeze first in January and February, when sales drop but the roster doesn’t. Our guide to Payday Super cash flow shows how to plan for the lumpy weeks.

The practical fix is to include super in your weekly labour line, not as a separate worry, so you’re looking at the real cost every Monday.

Which rostering choices move the number?

Cutting hours across the board is the clumsy way. These are the moves that usually matter, in rough order of impact:

1. Roster by half-hour, not by shift. Pull your POS data for the last eight weeks and plot sales by half-hour for each day of the week. Most venues find 90 minutes after opening and 60 minutes before close where two people do the work of four.
2. Stagger starts and finishes. A 10am to 6pm shift for everyone means the afternoon is overstaffed. Stagger starts across the lunch build and let the early finishers go as the room thins.
3. Match skills to the section. An experienced chef doing prep that a kitchenhand could do is the most expensive prep in the building. The same applies to a head barista wiping tables.
4. Cross-train. A floor person who can also run the pass or the machine lets you drop one body without dropping service.
5. Prep smarter. Batching prep on the quiet mornings, rather than at peak, trims the paid hours without touching the food.
6. Check your menu’s labour load. A dish that takes ten minutes of a chef’s time for a $22 sale is costing you more than its food cost suggests. Menu engineering is wage control in disguise.

What generally doesn’t work is cutting the busiest hours. That’s where lost service costs you the sale and the repeat visit.

What do Sundays and public holidays do to your wage cost?

They push it up, and they push it up unevenly. Under awards such as the Restaurant Industry Award, penalty rates apply for weekend and public holiday work and casual staff have their own loadings. We’re not going to quote rates here, because they change each 1 July and the method for casuals matters. Use the Fair Work Ombudsman’s Restaurant Industry Award page to open the current pay guide for your award and classification, and cost your own roster from it.

The approach that works: build a separate wage percentage for public holiday trading days. If takings on Boxing Day need to be a certain amount to match your normal wage percentage, you’ll know whether to open, whether to surcharge, or whether to close and take the break. Our public holiday trading page sets out the decision, and the public holiday surcharge guide covers how to show the charge if you add one.

When does payroll tax come into it?

For one venue, usually not. Payroll tax applies once your total Australian wages cross your state or territory’s threshold, and published 2026–27 thresholds for NSW, Victoria and Queensland sit around the $1 million to $1.3 million mark, though you should confirm the current figure with your own revenue office, such as Revenue NSW.

It matters for second-site plans. Wages across businesses that are grouped together are generally added up, so a second or third venue can push the group over the line even if each site is under it on its own. If you’re planning to expand, put payroll tax in the model before you sign the second lease, not after.

How do you make wage cost a weekly habit?

Don’t wait for the monthly accountant’s report. Do this on a Monday:

• Total last week’s sales excluding GST and last week’s gross wages, plus super and an on-cost allowance.
• Divide, write the percentage in a notebook or a simple sheet, and compare it with the last four weeks.
• Look at the worst day. Ask what the roster looked like against that day’s sales by half-hour.
• Change one thing in next week’s roster and see what the number does.

Four weeks of this teaches more than any benchmark. If you’re after a way to sketch out the lean months, the seasonal trade planner lets you map takings against costs. Our page on quiet months covers what to do when the number won’t come down because the customers aren’t there.

Quick answer: what’s the one number to check first?

Prime cost. Wages and food cost together tell you more than either alone, because owners often trade one against the other: cheaper ingredients and more prep hours, or pre-made product and fewer staff. Track the combined figure and you’ll see whether a change helped or just moved the cost somewhere else.

If you’d like help funding a busy stretch where wages go out before takings come in, a restaurant business loan is one option, and a quick call is the easiest way to see whether it fits. Check your options when you’re ready.

Found the pressure point? Let’s look at the funding side

Running a venue means paying the team on Friday whether or not Friday was busy. If your wage cost percentage is telling you the next few weeks are going to be tight, because of Christmas hiring, a January slump, or a second site on the way, it helps to know what funding you could call on before you need it.

Enquiring takes about 60 seconds, and there’s no credit check when you enquire, so asking what’s possible leaves your credit file alone. We don’t send your details to a pile of lenders, so your phone won’t light up with strangers. A real person who understands hospitality reads your enquiry, looks at your venue’s situation and calls you. The one thing we ask is that you fill the form in accurately, with real turnover and real numbers, so we can match the right option the first time.

See if you qualify →