How to Manage Labour Costs in Hospitality (AU Guide)

Labour is the biggest cost you can actually control in a hospitality business, and it is under more pressure than ever. As wages and operating costs continue to rise, keeping your roster on budget without hurting service has become a weekly balancing act. Shift activity is climbing too: according to Deputy's Big Shift Report 2026, Australian hospitality activity increased by 28 percent through to late 2025, so most operators are managing more shifts, and more wage cost, even as margins tighten.

This guide walks you through what labour costs actually include, what percentage they should sit at for an Australian venue, how to calculate your own figure, and practical ways to bring the number down while keeping your team and your guests happy.

Key takeaways

• Labour is the biggest controllable cost in hospitality, and most Australian venues sit somewhere between 20 and 32 percent of revenue depending on their format.

• Your true labour cost includes on-costs like superannuation, leave, and workers' compensation, plus award penalty and overtime rates, not just base wages.

• The fastest way to control it is to roster to forecast demand, track labour against sales daily, and keep your best people.

• Deputy can help by providing cost centre visibility, on-cost reporting, and AI-assisted scheduling recommendations that managers can review and adjust before publishing rosters.

What labour costs really include in hospitality

Labour costs cover every direct and indirect cost of employing your team, not just the wages on the payslip. Getting the full picture matters, because the hidden pieces are where budgets quietly blow out.

Direct labour costs are the wages, benefits, and paid time off for the people who produce what you sell. In a venue, that is your chefs, cooks, baristas, bartenders, and floor staff. Indirect labour costs are the roles that support the operation without serving guests directly, such as cleaners, security, and back-office admin. A security guard on a busy Friday night is a classic indirect cost: key to the night running well, but not making a single coffee or plate.

Wages themselves keep climbing, with the ABS Wage Price Index up 3.3 percent through the year to the March quarter 2026. According to Deputy's Big Shift Report 2026, average hourly pay in Australian hospitality reached $33.30 for men and $32.10 for women by early 2025, and both figures have risen steadily since 2022. When you add on-costs on top of a rising base rate, the gap between the wage you quote and the wage you actually pay gets wider every year.

What percentage should labour costs be in hospitality?

There is no single right number, because a fine dining kitchen and a quick-service cafe run completely different models. As a working benchmark for Australian venues, most operators aim for these ranges as a share of revenue:

• Cafes and quick-service: roughly 20 to 25 percent, thanks to simpler menus and faster service.

• Full-service restaurants and bars: roughly 25 to 30 percent, reflecting table service and larger teams.

• Fine dining: roughly 27 to 32 percent, where skilled kitchen and floor staff drive the experience.

Be careful with the figures you find online. A lot of the commonly quoted 25 to 35 percent range comes from the United States, and it overstates the Australian picture. American venues offset wages with tipping and do not carry the same award penalty rates, so their percentages are not a fair comparison. Benchmark against Australian ranges, then judge your own number against your format, your trading hours, and your local wage rates.

How to calculate your labour cost percentage

Your labour cost percentage is the share of your sales that goes to paying your team. The formula is simple:

Labour cost percentage = (total labour cost ÷ total sales revenue) × 100

Here is how to work it out for your venue:

1. Add up your total labour cost for the period, including wages, superannuation, leave, penalty rates, workers' compensation, and any uniform or training costs.

2. Add up your total sales revenue for the same period.

3. Divide labour cost by sales revenue, then multiply by 100.

As a worked example, say a cafe pays $5,525 in total labour costs across a week and takes $25,000 in sales. Dividing 5,525 by 25,000 and multiplying by 100 gives a labour cost percentage of 22.1 percent, which sits comfortably in the cafe and quick-service range.

Some operators also track labour as a share of total operating costs, or fold it into prime cost, which is labour plus the cost of goods sold. Prime cost gives you a wider view of your two biggest expenses together, but the wages to sales ratio is the number most managers watch day to day.

What to include in the calculation

A labour cost figure is only useful if it captures the full cost of employment. Make sure you include:

• Base wages and salaries for all staff.

• Superannuation contributions.

• Annual leave, personal leave, and public holiday pay.

• Penalty rates, overtime, and public holiday loadings.

• Workers' compensation premiums.

• Uniforms, training, and recruitment costs.

How Australian award rates and on-costs change your real labour cost

The reason Australian labour costs run higher than many overseas benchmarks comes down to awards and on-costs. Under the Hospitality Industry (General) Award, weekend work, public holidays, late nights, and overtime can attract penalty rates well above the base rate, and public holiday loadings can push a single shift's cost up sharply. On top of the hourly rate, you carry on-costs like superannuation, now set at 12 percent of ordinary earnings, plus leave accrual and workers' compensation that add a meaningful percentage to every hour worked.

Your pay cycle affects the admin load too. According to Deputy's Payday Super Checklist 2026, weekly payers make 48 extra superannuation payments a year compared with monthly payers, fortnightly payers make 22 more, so the frequency you choose changes how much super processing your team handles.

Getting these figures right matters: the Fair Work Ombudsman recovered $358 million in unpaid wages for underpaid workers in 2024-25. Deputy supports configurable pay rates and Award interpretations based on your organisation’s settings, and surfaces this information for manager review. You can see how your on-cost percentage shapes the true cost of a roster before you publish it, so managers can budget with the full figure in front of them.

Deputy is designed to support compliance workflows but does not provide legal advice or guarantee compliance. Customers remain responsible for configuring the platform appropriately and complying with applicable laws and regulations.

How to reduce labour costs without cutting service

Cutting labour cost does not have to mean cutting staff or shifts guests notice. The goal is to match the right people to the right hours, then watch the numbers closely enough to catch problems early. Here are four levers that work.

Roster to forecast demand, not habit

Copying last week's roster is the most common way venues overspend. Rostering to forecast demand means using your sales and foot-traffic data to schedule the number of people each period actually needs. Deputy research on labour demand forecasting suggests this approach can help reduce overstaffing during quieter periods while maintaining appropriate staffing during busier periods. Build your roster around when guests actually arrive, not when they arrived out of habit.

Track labour against sales every day, not just monthly

Reviewing labour once a month is too late to change anything. Tracking your wages to sales ratio daily lets you correct course while the week is still live. A Deputy ebook on predicting labour needs shows a venue holding labour to a 22.1 percent weekly average, with daily figures of 21, 20, 18, and 22 percent against a 22 percent estimate as sales and hours flex day to day. That daily rhythm is how good operators stay on budget without dramatic cuts.

Keep your best people to cut rehiring costs

Turnover is expensive: every departure means recruiting, onboarding, and training before a new hire is productive. The good news is that hospitality already has an engagement edge. According to Deputy's Australia 2026 Shift Pulse Report, hospitality leads all Australian industries on positive worker sentiment at 82.91 percent, so the team connection is there to build on. Fair, predictable rosters are one of the simplest ways to hold onto the people you have already trained.

Gonzalo Aurelios-Solis, Cafe Manager at Partners Coffee (based in the Americas), has seen this play out:

By managing our labor costs and scheduling better, we've been able to retain more staff. Baristas are getting the schedules they needed and I'm able to provide the business what it needs as well. Gonzalo Aurelios-Solis, Cafe Manager, Partners Coffee

Match roster balance to skills and cross-train

A roster stacked with your most senior staff on a quiet Tuesday is money left on the floor. Balance each shift so skill levels match the workload, and cross-train your team so people can flex between the coffee machine, the floor, and the till as demand shifts. A team that can cover more than one role gives you more ways to trim hours without leaving a gap in service.

How Deputy helps you manage hospitality labour costs

Once you know your numbers, the right tools make it far easier to act on them. Deputy brings your rostering, timesheets, and cost reporting into one place so managers can see the labour picture and make quick, informed calls.

Allocate wage costs to the right cost centre

Salaried staff often work across more than one part of your business, which makes their true cost hard to pin down. Deputy lets you allocate wage costs to the right cost centre so each area carries its fair share. Take Evan, who is scheduled for 24.5 hours with one team and 13.5 hours with another across a 38-hour week: his salary can be split across both cost centres in those proportions, helping provide a clearer view of labour costs by cost centre. For a manager like Naveed who mostly sits in one team but occasionally works elsewhere, you can instead assign his full cost to his home cost centre for a reliable cost by department.

See your true cost with on-cost reporting

Wages are only part of what you pay to employ someone. Deputy's on-cost reporting adds superannuation, annual leave, personal leave, and workers' compensation into the view, so roster cost estimates include configured on-costs such as superannuation, leave and workers’ compensation, helping managers understand estimated labour costs before publishing rosters. Each of these on-costs can look small on its own, but they add up quickly across a full team, and seeing them upfront helps you budget with confidence.

Forecast labour with AI-assisted scheduling

Deputy’s AI-assisted scheduling uses available sales and demand data to generate draft roster recommendations that managers can review, modify and approve. It is there to speed up the first draft and flag where you might be over or under-staffed, not to make the final call. Paired with demand-based rostering, it can help you build a week that matches labour to expected trade before you publish it.

Take control of your hospitality labour costs

Labour will always be your biggest controllable cost, but it does not have to be a mystery. When you know what your true cost includes, benchmark against realistic Australian ranges, calculate your percentage honestly, and roster to demand, you give yourself room to protect both your margins and your service. Track the number daily, look after your best people, and let your tools carry the admin.

Ready to get a clearer view of your labour costs? Start your free trial and see how Deputy can help your team roster more efficiently, improve visibility into labour costs, and support better budgeting.

Frequently asked questions

What is a good labour cost percentage for a hospitality business in Australia?

For most Australian venues, cafes and quick-service sit around 20 to 25 percent of revenue, full-service restaurants and bars around 25 to 30 percent, and fine dining around 27 to 32 percent. Commonly quoted United States figures of 25 to 35 percent tend to overstate the Australian picture, because they assume tipping and lower penalty rates. Tracking your own percentage in Deputy against these ranges tells you where you stand.

What counts as a labour cost besides wages?

Labour costs include far more than base pay. You should count superannuation, annual and personal leave, penalty rates, overtime, public holiday loadings, workers' compensation, and costs like uniforms and training. Adding these on-costs gives you the true cost of employing your team.

How do I calculate my labour cost percentage?

Divide your total labour cost by your total sales revenue for the same period, then multiply by 100. Include on-costs and penalty rates in the labour figure, not just wages. Deputy's reporting can help you pull the labour side of that equation together across your venues.

How can I reduce labour costs without cutting staff or service?

Roster to forecast demand rather than copying last week, track your wages to sales ratio daily instead of monthly, and keep your best people to avoid rehiring costs. Deputy's AI-assisted forecasting suggests draft rosters your managers review, so you can match labour to expected trade without guessing.

How does Deputy help control labour costs across multiple venues?

Deputy gives you cost centre allocation, on-cost reporting, and a single view across sites, so you can compare labour against sales venue by venue. That multi-site visibility helps managers spot which locations are running hot and act before the month closes.