If you only budget headline hourly wage, you will underprice labour.
UK operators have to model labour in layers: wage, employer NI, pension, then location-specific roster pressure. This guide gives a practical method you can run every month in under 15 minutes.
Quick Summary
- Calculate labour in this order:
gross wage -> employer NI -> employer pension -> loaded hourly cost. - For 2026 payroll planning, use April wage updates and 2026-2027 HMRC thresholds.
- Employer Class 1 NI is
15%above the secondary threshold (GBP 5,000/year). - Auto-enrolment minimum employer pension contribution remains
3%.
UK 2026 Statutory Context (Use Absolute Dates)
For decisions made in early 2026, these dates matter:
- National Living Wage (21+):
GBP 12.71from2026-04-01. - Employer Class 1 NI rate:
15%and secondary thresholdGBP 5,000/yearfor2026-04-06to2027-04-05. - ONS CPIH annual rate (December 2025 release, published
2026-01-21):3.6%all items,3.8%restaurants and hotels.
If your roster model still uses pre-April wage assumptions, your menu margin forecast is already stale.
The Labour Cost Stack You Should Actually Model
Use this sequence:
1) Annual gross pay = Hourly wage x Paid hours per year
2) Employer NI = max(Annual gross pay - Secondary threshold, 0) x NI rate
3) Employer pension = Pension base x Employer pension %
4) Loaded hourly cost = (Annual gross pay + Employer NI + Employer pension + other fixed on-costs) / Paid hours per yearFor planning, many operators use a conservative pension estimate on gross pay to avoid undercounting. For payroll accuracy, confirm exact qualifying earnings logic in your payroll system.
Worked Example: One Full-Time Team Member (2026 Baseline)
Assume:
- Hourly wage:
GBP 12.71 - Paid hours per year:
1,920(160 hours/month) - Employer NI rate:
15% - Secondary threshold:
GBP 5,000/year - Employer pension estimate:
3% of gross pay
Annual gross pay = 12.71 x 1,920 = GBP 24,403.20
Employer NI = (24,403.20 - 5,000) x 0.15 = GBP 2,910.48
Employer pension = 24,403.20 x 0.03 = GBP 732.10
Loaded hourly cost = (24,403.20 + 2,910.48 + 732.10) / 1,920
= GBP 14.61/hourThat is already +14.9% above headline wage before additional local on-costs.
Turn Loaded Labour into Menu Decisions
Convert hourly labour into cost per minute:
Labour cost per dish = Loaded hourly cost / 60 x Labour minutesExample with GBP 14.61/hour:
- 7 labour minutes dish ->
GBP 1.70 - 10 labour minutes dish ->
GBP 2.44
This is where many teams misprice: they model dish labour at wage rate, not loaded rate.
Local Operating Scenario: Manchester City Centre vs Bristol Neighbourhood
| Site profile | Typical labour pressure | Practical move |
|---|---|---|
| Manchester city-centre lunch-heavy | Tight lunch window, higher no-show risk on prep-heavy menus | Cap prep minutes on lunch top sellers and simplify garnish steps |
| Bristol neighbourhood evening-led | Lower noon pressure, longer evening dwell time | Keep service quality roles in peak slots, tighten low-demand weekday daytime hours |
Using one blanket labour-minute target across both sites usually creates false signals.
Monthly Control Routine (UK)
- Refresh hourly wage assumptions by role (FOH/BOH/supervisor).
- Recalculate loaded hourly cost using current HMRC thresholds.
- Review labour minutes for top 10 revenue dishes.
- Flag items where labour cost per dish rose more than
GBP 0.20. - Update rota before forcing full menu repricing.
Related Guides
- UK Restaurant Menu Pricing Guide
- UK Food Cost Calculator
- UK Restaurant VAT Pricing Guide
- UK Restaurant Prime Cost Calculator
- UK Service Charge & Tips Guide
- Restaurant Labor Cost Percentage Guide
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