Steele at a Glance | The Labour Percentage Trap: Are We Measuring the Wrong Thing?

 

Steele at a Glance | The Labour Percentage Trap: Are We Measuring the Wrong Thing?

In our last edition of Steele at a Glance, we looked at moving away from reactive "fill-in-the-blanks" scheduling toward an empowerment-first model taking inspiration from aviation's preferential bidding systems to align shifts with our people's lives and preferences. But even the best-designed, staff-centric roster can fall flat if it’s built on a metric that measures cost without measuring value.

That brings us to the single number that has likely dictated more shift decisions than any other: labour percentage.

Sales are soft? Check labour.

Wages are over budget? Cut a shift.

Forecast looks quiet? Send someone home early.

Labour percentage is useful, and every operator needs to understand it. But problems start when we treat it as the ultimate grade for whether a roster is actually working. A lower labour percentage doesn't automatically mean a better-run venue, and in fact, chasing a lower percentage can end up costing your business far more than it saves.

  • Ask yourself: Is your roster designed to protect today’s wage percentage, or to drive tomorrow’s revenue?

The Problem with Looking at Labour in Isolation

At its simplest, labour percentage tells us how much of our revenue is spent on wages: spend $5,000 on labour against $20,000 in sales, and you’re at 25%. Simple enough.

  • To consider: What does that 25% actually tell you about what happened on your floor?

It doesn't tell you if customers waited 20 minutes for a drink. It doesn't tell you if uncleared tables prevented a second seat turn, if a bar line snaked out the door, or if your manager spent three hours polishing glasses instead of leading the floor. And it certainly doesn't tell you whether adding one extra shift could have generated an additional $2,000 in revenue.

Labour percentage measures cost with absolute clarity, but it is completely blind to value.

A Good 30% Can Be Better Than a Bad 25%

Imagine two Saturday nights:

  • Scenario A: Management runs a bone-lean roster and finishes at 25% labour. On paper, it looks like a win. In reality, service was sluggish, staff were stressed, tables turned slowly, and customers gave up on ordering that extra round of drinks because the bar queue was six people deep.

  • Scenario B: The same venue runs at 30% labour with one extra floor staff member. Service flows effortlessly, tables turn faster, upsells happen naturally, and guests stay longer because ordering is easy.

If that extra shift generates enough additional top-line revenue and gross profit, the 30% labour figure isn't just acceptable, it’s the smarter business decision.

  • A challenge for leadership: Are you evaluating your team's roster success purely on wage control, or on the return you're getting from every labour dollar spent?

From Labour Cost to Labour Productivity

To get past the single-percentage trap, we have to look at productivity.

Instead of asking only what percentage of revenue went to wages, start tracking sales per labour hour (SPLH), covers per labour hour, or labour cost per customer. None of these metrics should be chased blindly either, but together they paint a picture of operational performance rather than just line-item expense.

More importantly, zoom in on trading periods rather than relying on weekly averages.

  • Reflect: Could a "perfect" 26% weekly labour average be hiding a roster that carries too many staff between 2 PM and 4 PM, while leaving your peak Friday dinner service completely understaffed?

A weekly percentage smooths out operational peaks and valleys, hiding inefficiencies at both ends of the spectrum.

Cutting Labour Is Easy. Improving Productivity Is Harder.

When margins tighten, cutting hours is the fastest lever a manager can pull. That immediate, measurable saving makes labour cuts psychologically attractive.

The hidden cost, the lost sales, slow table turns, and degraded customer experience—never shows up neatly on a P&L.

  • The balance test: Are you cutting a shift out of genuine operational necessity, or because it’s the easiest lever to pull when sales drop?

There comes a point where cutting labour stops improving efficiency and starts reducing your venue's capacity to make money. Saving two hours of bar wages might save $60, but if it costs you $300 in unmade cocktails, the "saving" was actually a loss.

Match Labour to Demand, Not Just Budget

Putting labour where it creates the most value requires accurate forecasting. Historical sales, table bookings, local events, weather, and seasonal patterns should shape your roster around expected demand, not habit or rigid budget templates. A quiet Monday afternoon and a busy Saturday night shouldn't be scaled versions of the exact same roster structure.

And ultimately, the customer must be part of the calculation. Hospitality businesses sell an experience. Speed, attentiveness, atmosphere, and warmth are the core product—food and drink are just vehicle. If cutting labour repeatedly compromises that experience, you're sacrificing long-term customer lifetime value for a short-term percentage win.

Start Asking a Better Question

The next time you review a roster, shift the conversation.

Instead of asking:

"Is our labour percentage too high?"

Ask:

"Is the labour we have rostered producing maximum value?"

Sometimes hours do need to come out. But often, the solution isn't fewer people, it's better deployment, stronger floor processes, the right skill mix, or adjusting staffing to match actual demand peaks.

The best operators aren't the ones who spend the absolute least on labour. They're the ones who know where each dollar yields the highest return.

Thanks for joining us for another edition of Steele at a Glance.

Until next time, keep questioning the numbers, keep looking beyond the percentage, and keep building rosters that work for both the business and the people behind it.


Ben

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