You had a big Saturday. The room was full and the kitchen never stopped. Then the week’s numbers land and there’s barely anything left. In most cafes, restaurants and bars, the reason is the same: wages ate the profit.
Hospitality wages as a percentage of revenue is the number that tells you if your roster matches your trade. For Australian restaurants turning over more than $2M, the ATO’s latest benchmarks put staff labour at 27% to 34% of turnover. Once you add super and other on-costs, most venues we see need to land somewhere in the low to mid 30s to make a decent profit.
This guide shows you how to work out your own wage percentage, what a healthy range looks like, and how to bring it down without hurting service.
In short:
- Wage percentage is total wage costs divided by revenue (excluding GST) for the same period.
- ATO benchmarks for 2023 to 24 put staff labour at 27% to 34% of turnover for restaurants over $2M, and 27% to 35% for coffee shops over $600,000.
- Track it weekly and by day, because a good monthly average can hide quiet shifts that lose money.
- Include super and on-costs in your own numbers, or your wage percentage will look better than it really is.
- Roster to forecast sales, not to habit. That one change often moves wages by several points.
What is a good wage percentage for hospitality in Australia?
A good wage percentage for most Australian hospitality businesses sits around 30% to 35% of revenue, once super is included. Where you should land depends on your venue type, your size and how much of your menu is made from scratch.
The best public reference point is the ATO small business benchmarks. They’re built from tax return data for the 2023 to 24 financial year. Here are the labour ranges for two common venue types.
| Venue type and annual turnover | Labour as % of turnover | Cost of sales as % of turnover |
|---|---|---|
| Restaurant, $500,001 to $2M | 23% to 32% | 32% to 38% |
| Restaurant, more than $2M | 27% to 34% | 31% to 36% |
| Coffee shop, $250,001 to $600,000 | 21% to 32% | 35% to 41% |
| Coffee shop, more than $600,000 | 27% to 35% | 33% to 38% |
Two things to know before you compare yourself. First, the ATO’s labour figure leaves out wages paid to owners and partners, so if you work in the business, your true labour cost is higher. Second, these are ranges for what businesses actually do, not targets. Plenty of venues inside the range still make very little profit.
Why bigger venues often run a higher wage percentage
Larger venues usually carry salaried managers, head chefs and more support staff. Small cafes lean on the owner working the floor for free. That’s why the ATO ranges climb as turnover grows, even though bigger venues should get better at rostering.
How do you calculate your wage percentage?
Divide your total wage costs by your revenue for the same period, then multiply by 100. Use revenue excluding GST, and use the same dates for both numbers.
The hard part is deciding what counts as “wages”. For your own management reports, we suggest you include:
- Gross wages for all staff, including casual loading, penalty rates and overtime
- Super, now 12% of earnings for eligible staff
- Payroll tax, if your wages are over your state’s threshold
- WorkCover premiums
- Agency and contract staff who cover shifts
- A fair market wage for any owner who works shifts
This is often called your “fully loaded” wage percentage. It’s higher than the ATO measure, but it’s the one that tells you what your roster really costs. Pick one definition and stick to it so your weekly numbers compare like with like.
Worked example: a $3.2M restaurant
This is an example with realistic numbers, not a real client. A restaurant turns over $3.2M a year, excluding GST. That’s about $61,500 a week.
- Staff wages: $1,056,000 a year. That’s 33% of revenue, which sits inside the ATO range of 27% to 34%.
- Add super at 12%: $126,720. Now wages are $1,182,720, or 37% of revenue.
- Look at it by day: Friday and Saturday run at about 28%. Monday and Tuesday run at about 48%, because the roster is the same size most nights but the room is half empty.
On paper, this venue looks “normal” against the benchmark. In practice, two quiet nights are dragging the whole week down.
The owner makes three changes. They roster Monday and Tuesday to forecast covers, using the last eight weeks of the same nights. They start the second chef an hour later on weeknights. And they move one floor role from a fixed shift to an “on call if bookings pass 60” arrangement, agreed with the staff member and in line with the award.
Fully loaded wages drop from 37% to 34%. Three points on $3.2M is $96,000 a year back in the business, with no price rise and no change to the menu.
An accountant shows you what already happened. A CFO shows you what to do next.
Why are hospitality wages so hard to control?
Hospitality wages are hard to control because your sales change hour by hour, but your roster is often set a week ahead. Every shift you roster for a busy night that turns out quiet costs you directly.
A few other things push the number up:
- Penalty rates. Weekends, late nights and public holidays cost more. Check the right rates for your award in the Fair Work Restaurant Industry Award summary.
- Minimum shift lengths. You can’t always send someone home after an hour, so short quiet periods still cost a full shift.
- Award increases. Wages rise each July. If your prices don’t move with them, your wage percentage creeps up every year.
- Seasonality. Coastal and tourist venues can see revenue halve in winter while fixed salaries stay the same.
None of this means you should pay people less. It means you need a roster that follows your sales and prices that cover the true cost of your team.
How can you reduce your wage percentage without hurting service?
The best way to reduce your wage percentage is to match your roster to your expected sales, shift by shift. Cutting staff across the board usually hurts service and sales, which makes the percentage worse, not better.
Here’s a simple weekly process that works for most venues.
- Forecast sales for each day. Use the same day from the last six to eight weeks, then adjust for bookings, events and weather.
- Set a wage budget for each day. Multiply forecast sales by your target wage percentage. For example, $9,000 forecast at 32% gives you $2,880 to spend.
- Build the roster to that budget. Start with the core team every shift needs, then add staff only as forecast sales rise.
- Review each shift the next morning. Compare actual sales and actual hours. Note why any shift went over.
- Check the week every Monday. Look at wage percentage by day, not just the weekly total.
- Fix prices if the roster is already tight. If you’re rostering well and still over target, your prices may be too low for your wage costs.
Your POS and payroll systems can do most of the heavy lifting here. Many venues connect them to Xero so that sales and wages land in the same place each week. If your bookkeeping is set up to report weekly, this review takes about 15 minutes.
Look at revenue per labour hour
Revenue per labour hour is sales divided by total hours worked. If a Friday does $14,000 across 140 hours, that’s $100 an hour. If a Tuesday does $4,000 across 70 hours, that’s about $57. This number shows you which shifts are overstaffed far more clearly than a weekly percentage.
Should wages and food cost be looked at together?
Yes. Wages and cost of sales together are often called “prime cost”, and it’s the number many experienced operators watch most closely. You can trade one against the other.
A venue that buys in prepared sauces and desserts will have a higher food cost but a lower wage cost. A venue that makes everything from scratch is the opposite. That’s why your wage percentage on its own can mislead you. Using the ATO ranges above, a restaurant over $2M is spending somewhere around 58% to 70% of turnover on staff labour and cost of sales combined, before super and owner wages.
If your prime cost is high, look at both sides before you cut anything. Our guide on how to improve profit margins in a small business walks through pricing, cost and mix in more detail.
How does super affect hospitality cash flow from July 2026?
From 1 July 2026, Payday Super means super must reach your staff’s funds within 7 business days of each payday, rather than each quarter. The cost is the same, but the cash leaves your account much sooner.
For a hospitality business paying weekly, that means super goes out every week. If you used to hold that cash for a quarter, you’ll feel the difference. Plan for it in your weekly cash routine, the same way you’d set aside money for BAS each month.
Common questions
Should owner wages be included in my wage percentage?
Yes, for your own management reports you should include a fair market wage for any owner who works shifts. If you leave it out, your wage percentage looks healthy while the business can’t afford to replace you. The ATO benchmarks leave owner wages out, so add yours back when you compare.
How often should I check my wage percentage?
Check it weekly, and look at each day separately. Monthly is too slow in hospitality, because by the time you see a problem you’ve already paid for four weeks of it. Many owners review the previous day’s sales and hours every morning.
Is a low wage percentage always good?
No. A very low wage percentage can mean you’re short staffed, service is slipping, or the owner is working unpaid hours. Watch reviews, ticket times and staff turnover alongside the number. The goal is the right roster for your sales, not the smallest one.
What wage percentage should a cafe aim for?
Most cafes over $600,000 in turnover sit between 27% and 35% of turnover in staff labour, according to the ATO’s 2023 to 24 benchmarks. Smaller cafes often look lower because the owner works the coffee machine for free. Set your own target from your menu, opening hours and the profit you want to make.
Want your wages and profit under control?
We help hospitality owners set wage targets, build weekly reports and price their menus so the business actually makes money. Our clients see an average 29% lift in profit and 17% lift in cash flow (results vary). Book a free call to talk it through, or see how our virtual CFO packages work. If you’d like to start on your own, grab our free Excel template, Run your business with Complete Financial Clarity.
Related reading
This article is general information only and doesn’t take your circumstances into account. Speak with a qualified adviser before making decisions.
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