How to use the labor budget hours calculator
- Choose whether to start from a sales forecast or from a fixed budget.
- For a forecast, enter the forecast sales and the labor share of sales that you want to spend on labor. For a budget, enter the dollar amount.
- Enter the average cost per labor hour. Include payroll costs in this number if the budget is meant to cover them.
- Optionally enter the days open to split the hours by day. Read the hours to schedule and the budget behind them.
Formula
Labor budget = forecast sales x labor share / 100 (or the fixed budget you enter)
Hours to schedule = labor budget / cost per labor hour
Hours per day = hours to schedule / days open
The labor share is your own target for the period. The tool does not say what share is right for any business.
$6,000 of sales at 25% labor and $15 an hour
A cafe forecasts $6,000 of sales for the week and wants labor to be 25% of sales. The labor budget is $6,000 x 25% = $1,500. At $15.00 per labor hour that pays for $1,500 / $15 = 100 hours.
Spread over 7 open days, that is 100 / 7 = 14.29 hours a day. If the budget was fixed at $1,500 from the start, the hours are the same. Change the forecast or the hourly cost and the hours move in step.
From a percent to a schedule
Many managers set a labor target as a share of sales and then convert it to hours before building a rota. The conversion is one division, but it is easy to get wrong when the hourly cost leaves out payroll costs. If your budget is meant to cover taxes and benefits, enter a loaded hourly cost, which you can estimate with the employee cost calculator.
The result is a pool of hours, not a roster. Once you have it, the weekly schedule maker helps place the hours on days and people, and the labor cost calculator shows what a set of employees costs.
What the hours leave out
A sales forecast is a guess, and hours are fixed once they are scheduled, so a quiet day can leave you over budget. Minimum coverage, breaks, overtime rules and availability are not in this arithmetic. Treat the hours as a ceiling to plan within and adjust as real sales come in.
For restaurants, the prime cost calculator puts labor beside the cost of goods sold, and the crew hours calculator divides job hours among a crew.
Assumptions and limits
- The forecast, labor share and hourly cost are numbers you enter.
- One average cost per hour is used for all hours.
- Hours are not tied to coverage needs, breaks or overtime rules.
- Tips, taxes and benefits are included only if you add them to the hourly cost.
Frequently asked questions
How do I turn a labor percent into hours?
Multiply forecast sales by the labor percent to get a dollar budget, then divide by the cost per labor hour. $6,000 at 25% and $15 an hour gives 100 hours.
What labor percent should I use?
That is your decision. This tool takes the target you set and does the arithmetic, and it does not claim any percent is right for your business.
Should the hourly cost include taxes?
Include them if the budget is meant to pay for them. A loaded hourly cost gives fewer hours than a bare wage, so use the same basis for the budget and the rate.
Why enter days open?
Dividing the hours by the days open gives hours per day, which is a handy starting point for building a daily schedule.