How to set a weekly labor budget

1. Find the labor share your business can carry

Labor cost percentage is labor cost divided by sales. Pull last quarter's payroll (wages plus employer payroll taxes) and divide by sales for the same quarter. That is where you are. Then check it against your margins: your break-even and profit margin figures show how much of each sales dollar is left to pay labor. A gift shop decides it can carry 30%.

2. Forecast the week's sales

Use the same week last month or last year, adjusted for anything different: a holiday, an event, road work. Take the lower number if you are unsure. The shop expects $8,000.

3. Multiply for the budget

$8,000 × 30% = $2,400 for the week.

4. Find what one paid hour really costs

Wage plus the employer's payroll costs. Employer Social Security and Medicare are 7.65% of wages, and most employers also pay unemployment tax and workers' comp. Staff at $15 an hour with 10% added: $15 × 1.10 = $16.50.

5. Divide for hours

$2,400 ÷ $16.50 = 145.5 paid hours, about 3.6 people working 40 hours.

6. Check the schedule against it

A schedule with 170 paid hours costs 170 × $16.50 = $2,805, which is 35.1% of sales and $405 over. Take out about 24.5 hours from the quiet part of the week, or the week has to sell $9,350 to carry that schedule.

7. Know the sales each hour must bring in

$8,000 ÷ 145.5 hours = about $55 of sales per paid hour. If a slow shift cannot bring in that much, it is the first place to look.

In a spreadsheet

What to do with the answer

Write the budget at the top of the schedule before you fill in names. Trim the quietest hours first; cutting busy hours costs more in lost sales than it saves. Review the real labor share each week for a month and adjust the forecast, not the arithmetic.

Planning estimate, not payroll or legal advice. Overtime, break and minimum-shift rules vary by state.

Published by Groundwork Business Advisory. Updated October 24, 2026.