Restaurant Labor Costs in the United States
The federal minimum wage is $7.25 an hour, and the federal minimum cash wage for tipped employees is $2.13 with a maximum tip credit of $5.12. Most states set higher floors and several have abolished the tip credit entirely. On benchmarks, the National Restaurant Association reports median labor cost of 36.5% of sales for full-service restaurants and 31.7% for limited-service.
Figures verified July 2026
Statutory rates
| Rate | Per hour | Source |
|---|---|---|
| Federal minimum wage1 | $7.25/hr | U.S. Department of Labor, Wage and Hour DivisionRevised 1 January 2026 |
| Federal minimum cash wage (tipped)2 | $2.13/hr | U.S. Department of Labor, Wage and Hour DivisionRevised 1 January 2026 |
| Maximum federal tip credit | $5.12/hr | U.S. Department of Labor, Wage and Hour DivisionRevised 1 January 2026 |
1 State and local rates are frequently higher and take precedence.
2 Only where tips bring total earnings to at least the full minimum wage.
Next scheduled change: 1 January 2027. Most state changes land on 1 January; Florida uses 30 September and Alaska 1 July.
What food-service roles actually pay
The statutory floor tells you what you may not go below. What you will actually pay to fill a role is a different number, and it is the one that drives your labor cost.
| Role | Median hourly | Source |
|---|---|---|
| Food service managers1 | $31.40/hr | U.S. Bureau of Labor StatisticsMay 2024 |
| Chefs and head cooks | $29.32/hr | U.S. Bureau of Labor StatisticsMay 2024 |
| Cooks, restaurant | $17.71/hr | U.S. Bureau of Labor StatisticsMay 2024 |
| Food preparation workers | $16.45/hr | U.S. Bureau of Labor StatisticsMay 2024 |
| Waiters and waitresses2 | $16.23/hr | U.S. Bureau of Labor StatisticsMay 2024 |
| Dishwashers | $16.19/hr | U.S. Bureau of Labor StatisticsMay 2024 |
| Bartenders | $16.12/hr | U.S. Bureau of Labor StatisticsMay 2024 |
| Hosts and hostesses | $14.61/hr | U.S. Bureau of Labor StatisticsMay 2024 |
| Cooks, fast food | $14.50/hr | U.S. Bureau of Labor StatisticsMay 2024 |
1 Median hourly wage, national.
2 Excludes tips not paid through payroll.
From an hourly rate to a labor cost percentage
The rates above are what you may not pay below. What an hour costs you is larger, once the on-costs below are added, and the labor cost percentage calculator will turn the two halves into a figure you can compare. The prime cost calculator then tells you whether that number and your food cost together leave room for rent and profit.
Tips and tip handling
Federal law allows a tip credit: you may pay a cash wage as low as $2.13 an hour provided tips bring the employee up to at least the full minimum wage, and you must make up the shortfall when they don’t. States diverge sharply from there, and several have abolished the credit entirely. California, Washington, Oregon, Nevada, Alaska and Minnesota all require the full state minimum before tips. Arizona uses a fixed $3.00 differential, Illinois a percentage, and Connecticut sets different rates for bartenders and waitstaff. Check your state and any city ordinance, since local rules often sit above the state floor.
If you need to write this down for your team, the tip-out policy generator produces a plain-language policy document, and the tip-out calculator handles the nightly split.
What else drives your labor cost here
Payroll taxes and benefits
Gross wages understate what an hour costs you. Employer payroll taxes, unemployment insurance, workers’ comp and any health coverage all sit on top. The National Restaurant Association’s labour figures include benefits, which is why they read higher than a raw wages-to-sales sum and why comparing the two makes you look better than you are.
Turnover
Recruiting and training are real labour costs that almost never appear on the labour line. In a high-churn site they can quietly exceed whatever you saved by running a thinner rota.
Local ordinances
City and county minimums frequently sit above the state figure. The rate that applies to you is the highest of federal, state and local, so check the ordinance for the municipality you actually trade in.
Predictive scheduling
Several jurisdictions require advance notice of schedules and premium pay for late changes. Where those apply, a last-minute call-in costs more than the hours worked.
For what your percentage should be measured against, see the cost benchmarks by type of food business.
Run your own numbers
Frequently asked questions
What is the federal tipped minimum wage in 2026?
The federal minimum cash wage for tipped employees is $2.13 an hour, with a maximum tip credit of $5.12. It only applies where tips bring the employee to at least the full $7.25 federal minimum; otherwise the employer makes up the difference.
Which states do not allow a tip credit?
Per the Department of Labor, states requiring the full state minimum before tips include California, Washington, Oregon, Nevada, Alaska and Minnesota. Rules change, so check the current DOL table before building a pay model on it.
What is a good labor cost percentage for a restaurant?
The National Restaurant Association’s 2026 State of the Industry report puts the median at 36.5% of sales for full-service, with profitable operators near 34.2%, and 31.7% for limited-service. Treat them as orientation; the right number is whatever leaves your prime cost viable.
How much do restaurant cooks earn in the US?
BLS puts the national median hourly wage for restaurant cooks at $17.71, fast food cooks at $14.50, and chefs and head cooks at $29.32. State estimates vary substantially and are published separately.
Are restaurant labor costs rising?
The National Restaurant Association reports current readings well above its earlier editions, where full-service respondents averaged roughly 33% of sales and limited-service roughly 28% across the 2010, 2013 and 2016 reports.
Labor costs elsewhere
- Restaurant Labor Costs in CaliforniaOne of the highest state floors, and no tip credit at all.
- Restaurant Labor Costs in New YorkTwo regional rates, and tipped wages that vary by region and employer type.
- Restaurant Labor Costs in TexasFederal floor, full tip credit, and a market rate well above both.
- Restaurant Labor Costs in FloridaA scheduled step-up path, and an increase date most states don’t share.
Rates on this page are reproduced from the government sources listed below and were last checked on 20 July 2026. They are published for orientation and are not legal advice — before you set pay, confirm the current figure against the primary source for your jurisdiction, including any local ordinance that may exceed it. The headline rate at time of writing was $7.25 per hour.
Sources
- U.S. Bureau of Labor Statistics — Table 1. National employment and wage data from the Occupational Employment and Wage Statistics survey by occupationMay 2024 · Government / statistical
- U.S. Department of Labor, Wage and Hour Division — Minimum Wages for Tipped EmployeesRevised 1 January 2026 · Government / statistical