What is a good labour cost percentage for a cafe?
There is no official figure for a good labour cost percentage in an Australian cafe, and the numbers passed around rarely say what they include. This article shows how to calculate yours, what moves it, and how to set a target from the weeks your cafe traded well.
There is no official benchmark for a good labour cost percentage in a cafe. A good percentage is one your cafe can sustain while serving customers well, and the reliable way to find it is from your own figures: labour cost divided by sales excluding GST, measured the same way every week, with a target taken from the weeks when the cafe traded and served well.
That is less satisfying than a single number, but a borrowed number can do real harm. A figure that suits a coffee window with one person on the machine will starve a brunch cafe with table service, and a figure that leaves out super or the owner’s own hours will make almost any cafe look over budget. The rest of this article shows how to calculate the percentage properly, why it differs so much from one cafe to the next, and how to turn your own history into a target you can roster to.
How to calculate labour cost percentage
Labour cost percentage is labour cost divided by sales for the same period, written as a percentage.
labour cost percentage = labour cost ÷ sales × 100Take a week at a suburban cafe. Gross wages for everyone on the roster came to $5,400, and superannuation from the pay run added $648, so labour cost was $6,048. Sales for the same week were $19,200 excluding GST.
| Wages only | Wages and super | |
|---|---|---|
| Labour cost | $5,400 | $6,048 |
| Sales excluding GST | $19,200 | $19,200 |
| Labour cost percentage | 28.1% | 31.5% |
Same week, same cafe, and the answer moves by 3.4 percentage points depending on whether super is in. Neither figure is good or bad on its own, and neither is a target. What matters is choosing one method and keeping to it, so this week can be compared with last week. The labour cost percentage calculator does the sum with or without on-costs.
Decide what goes into the number
Much of the disagreement about a good percentage is really disagreement about what is being measured. Write your definition down and use it every week.
| Item | Include it? | Why it matters |
|---|---|---|
| Wages for every employee | Yes | Full-time, part-time and casual pay, including penalty rates, loadings, overtime and allowances |
| Superannuation | Your choice, but always the same | It adds a real amount on top of wages, so a figure without it cannot be compared with one that has it |
| Payroll tax and workers compensation | Your choice, but always the same | Payroll tax applies only to some businesses, and premiums are easier to compare when spread evenly across the weeks |
| Paid leave | Yes, on its own line | Leave is a labour cost, but it can make a week look expensive for reasons that have nothing to do with the roster |
| The owner’s own hours | Count them separately | An owner working long unpaid hours makes the percentage look lower than the cafe could sustain with an employee in that role |
| Sales | Excluding GST | The GST is collected for the government, so it is not money the wages are paid from |
| Delivery app sales | Your choice, but always the same | Decide whether to count them before or after the platform’s commission |
If you include super, take the figure from payroll. The Australian Taxation Office sets the super guarantee at 12% for the year from 1 July 2026, calculated on each eligible employee’s qualifying earnings, and its super guarantee page is the place to check what it applies to.
The owner’s hours deserve a closer look, because they are a common reason a cafe’s percentage looks healthy while the business is not. Work the percentage out twice: once as it is, and once with the owner’s rostered hours costed at what you would pay an employee to do that job. The gap between the two is how much the cafe depends on the owner working for nothing.
Why one cafe’s percentage is not another’s
Two well-run cafes can sit a long way apart and both be doing the right thing. These are the main reasons:
- How customers are served. Counter service with a number on the table needs fewer people for each sale than table service with waiters taking orders.
- How much is made on site. A kitchen cooking brunch from scratch carries more labour than a cafe selling pastries delivered each morning.
- The average sale. A cafe selling mostly takeaway coffee needs more transactions to cover each hour of labour than one selling full meals.
- Trading hours. Every open hour needs a minimum crew, so long quiet stretches at either end of the day push the percentage up.
- When you trade. Weekend and public holiday hours cost more under the award, so the trading week changes the figure.
- Who is on the roster. Senior staff on higher classifications, casual loadings and the owner’s unpaid hours all change the cost of the same roster.
- Your other costs. A cafe with low rent and cheap ingredients can carry a higher labour percentage than one paying a premium for its location.
On the award point, many cafes are covered by the Restaurant Industry Award 2020, whose definition of the restaurant industry includes cafes (clause 4.2). Under Table 8 in clause 24, full-time and part-time employees are paid 125% of their minimum hourly rate for ordinary hours on a Saturday, 150% on a Sunday and 225% on a public holiday, and casual employees have their own columns that already include the casual loading. A cafe doing half its trade at the weekend will have a different percentage from one that closes on Sundays, with exactly the same roster discipline. Confirm your award with the Fair Work Ombudsman’s Find my award tool and check current rates on the Restaurant Industry Award pay rates page.
Find your own baseline
Your own history is the best guide you have. Pull at least eight recent weeks, more if your trade swings with the seasons, and calculate the percentage for each one using the same method. Beside each week, write a few words about how it went: good service, queues, staff standing around, a wet week.
| Week | Sales excluding GST | Labour cost | Percentage | How the week went |
|---|---|---|---|---|
| 1 | $18,000 | $5,940 | 33.0% | Good service |
| 2 | $19,500 | $6,045 | 31.0% | Good service |
| 3 | $21,000 | $6,300 | 30.0% | Busy, but coped well |
| 4 | $16,000 | $6,080 | 38.0% | Rain all week, roster not cut back |
| 5 | $20,000 | $5,400 | 27.0% | Two people short, long queues and complaints |
| 6 | $19,000 | $5,985 | 31.5% | Good service |
| 7 | $22,000 | $6,710 | 30.5% | Good service |
| 8 | $18,500 | $5,920 | 32.0% | Good service |
| All eight | $154,000 | $48,380 | 31.4% |
The lowest week is not the one to copy. Week 5 came in at 27.0% because the cafe was two people short, and the queues and complaints cost trade the percentage cannot show. Week 4 is the opposite: rain cut sales and the roster did not follow. Leave both out, and the six weeks when service was good ran from 30.0% to 33.0%, or 31.3% taken together, with $36,900 of labour cost against $118,000 of sales. That range, not a figure from somebody else’s cafe, is this cafe’s starting target.
Set a target that allows for quiet weeks
A percentage target on its own has a flaw: part of a cafe’s labour does not change with sales. Somebody has to open, make coffee and close, however quiet the day. Suppose the cafe’s minimum crew costs $3,600 a week before a single extra shift is added. At $24,000 of sales, that fixed part is 15% of sales. At $12,000 it is 30%, before anyone else is rostered. The percentage climbs in quiet weeks even when the roster is as lean as it can safely be.
So set the target as a range and read it against sales. A quiet week above the range is worth a look but may be unavoidable. A busy week above the range is a roster that did not follow the trade. Then turn the target into dollars before the week starts: a sales forecast of $20,000 at a 31% target gives a labour budget of $6,200 to roster to. Building a roster around a weekly wage budget and forecasting staffing from weekly sales cover those two steps.
Look at each day as well as the week
A weekly percentage can hide a problem day. Most point of sale systems report sales by day, and the roster or timesheets give labour cost by day, so the same calculation works for a single Monday. A day that is always well above the week’s figure points to a specific decision: opening before customers arrive, a full team rostered on a day that no longer trades as it used to, or a Sunday whose sales do not carry its penalty rates.
Check the gap between rostered and actual cost too. A cafe can set a sensible target, roster to it and still miss it because shifts run over. Comparing rostered and actual labour costs shows how to find where that money went.
When the percentage is too high
Labour cost percentage has two halves, and either can move. Before cutting hours, work out which half changed.
- Sales fell. If labour cost held steady and sales dropped, the fix may lie in trading hours, the menu or bringing customers in, rather than the roster.
- Hours crept up. Compare this month’s rostered hours with a month of similar trade earlier in the year, and look for shifts that no longer match the busy periods.
- The hours got dearer. More weekend trade, a senior employee covering junior shifts, or overruns paid at overtime rates all raise cost without adding hours.
- Prices fell behind. If wages have risen and menu prices have not, the percentage rises with no change at all in how the cafe is run.
On that last point, an Expert Panel of the Fair Work Commission reviews minimum wages each year, including the minimum wages in modern awards, and its decision usually comes into operation on 1 July. Put the date in your diary, check the pay rates page once the new rates apply, and decide whether prices need to move with them. The rates in the award are minimum rates (clause 18 of the Restaurant Industry Award), so the levers are hours, prices and sales, never pay below the award. The cafe rostering guide covers building a leaner week.
Mistakes that make the number misleading
- Comparing your figure with one that includes different things, such as a number without super or without the owner’s hours
- Using sales including GST in some weeks and excluding it in others
- Looking only at the month, where one bad week hides among three good ones
- Chasing a lower percentage by rostering fewer people than the trade needs
- Changing the method partway through the year, so earlier weeks no longer compare
- Treating one week’s figure as the verdict, instead of the range over several weeks
Roster Flow keeps the labour half of the sum in view: availability and leave from staff phones, the roster published to everybody at once, clock ins that become timesheets, and approved hours sent to Xero, MYOB or a CSV file. See how it works for cafes.
Questions
Is there an industry standard labour cost percentage for Australian cafes?
There is no official one. Figures quoted around the industry rarely say whether they include super, the owner’s hours or GST, so they are hard to compare with your own, and your own good weeks are a more reliable guide.
Should the owner’s wages be included in labour cost percentage?
If the owner works on the roster, calculate it both ways: as paid, and with the owner’s hours costed at what an employee in that role would be paid. The difference shows how much the cafe relies on unpaid work.
Should I use sales including or excluding GST?
Excluding GST, because the GST is not the cafe’s money to spend. Whichever you choose, use the same measure every week.
Why does my labour cost percentage jump in quiet weeks?
Part of the labour cost stays the same however quiet it is, because someone has to open, serve and close. When sales fall, that fixed part becomes a bigger share of a smaller number.
Is a lower labour cost percentage always better?
No. A week can come in low because the cafe was short-staffed, with queues and lost customers the percentage does not show. Read the figure alongside how the week actually went.
How often should a cafe check its labour cost percentage?
Weekly for the roster, by day for decisions about trading hours, and over a few months for the trend. Look again once new award rates apply each year.
Sources
- Fair Work Commission: Restaurant Industry Award 2020 [MA000119]
- Fair Work Commission: annual wage reviews
- Australian Taxation Office: super guarantee
- Fair Work Ombudsman: find my award