The payroll cost ratio relates total staff costs — gross wages including employer social-security contributions, supplements and casual staff — to net revenue. Alongside the cost-of-goods ratio, it is the most important cost KPI in hospitality: together they determine whether anything is left at the bottom line (prime cost).
| Business type | Typical corridor |
|---|---|
| Restaurants (food-led) | 30 – 38% |
| Hotels overall (with F&B) | 33 – 45% |
| B&B / rooms-led hotels | 25 – 35% |
| System catering | 22 – 30% |
Benchmarks, strongly dependent on concept, opening hours, collective agreements and region. Prime-cost rule of thumb: cost-of-goods + payroll ratio should stay below ~65% combined, otherwise rent, energy and profit get squeezed.
Enter monthly or annual figures — just use the same period.
Prime cost at the limit — re-cost the menu or raise productivity per shift.
For internal steering: yes, include it as an imputed cost — otherwise a working owner family flatters the ratio and the business is worth less than assumed.
Both: monthly for steering (seasonality!), annually for benchmarking. Spread one-off payments such as holiday bonuses across the year.
No — permanent understaffing costs service quality, reviews and ultimately revenue. The ratio is a steering tool, not a race to the bottom.