Labour Cost Percentage Calculator
Labour cost as a percentage of revenue — total payroll including on-costs over sales — with the revenue each payroll dollar produces and how the figure sits against typical ranges for the industry.
Add wages, salaries, employer contributions, payroll taxes, leave and other on-costs for the period, and divide by revenue.
How the labour cost percentage calculator works
Add wages, salaries, employer contributions, payroll taxes, leave and other on-costs for the period, and divide by revenue. Ranges differ enormously by industry: manufacturing and retail run 10–25%, restaurants 25–35%, professional and creative services 40–60% because people are the product. Track the figure over time rather than against another industry; a rising trend with flat revenue is the warning sign.
Formula: labour cost % = total labour cost ÷ revenue × 100; revenue per payroll dollar = revenue ÷ labour cost
Worked examples
| Inputs | Labour cost as a share of revenue | Note |
|---|---|---|
| 640,000 wages, 22% on-costs, 2.4 million revenue, services | 32.5 % | 32.5% — below the range |
| A restaurant: 300,000 on 950,000 | 37.3 % | 37.3% — above the range |
| A retailer: 150,000 on 1.1 million | 16.4 % | 16.4% — within |
FAQFrequently asked questions
What should on-costs include?
Everything an employee costs beyond the pay slip: employer retirement contributions, payroll taxes and levies, workers’ compensation insurance, paid leave accruals, and often training and equipment. 20–30% of wages is typical; the true cost of an employee calculator breaks it down.
Should owners’ pay be included?
Yes, at a market rate for the work they do, or the percentage flatters a small business whose owner is underpaid. Contractors doing employee-like work belong in it too.
Why do the industry ranges differ so much?
Because of what else the business pays for: a restaurant spends on food and rent, a manufacturer on materials and machines, while a consultancy’s cost is almost all people. Compare within the industry and with your own history.
How do I improve the ratio?
Raise revenue per head (pricing, mix, productivity) before cutting people; rostering to demand, reducing overtime and turnover, and automation each move it a few points. Cutting below the industry range usually shows up as lost service or sales.
Where these figures come from
- CIPD — Employee turnover and retention factsheet — the turnover and stability index definitions used here
- Fair Work Ombudsman — the Australian workplace regulator
Last checked: September 2026. These are standard management definitions; where practice varies, the page says which convention it uses.