Labour cost percentage calculator

Labour cost percentage is the share of revenue spent on labour. It is calculated as total labour cost divided by revenue, multiplied by 100. Total labour cost includes gross pay, employer on-costs such as payroll taxes and pension, and other people costs such as agency staff.

Add gross wages, employer on-costs and other labour costs such as agency or contractor fees, then divide by revenue for the same period and multiply by 100. For example, a total labour cost of £1.5 million on revenue of £5 million is a labour cost percentage of 30%.

It depends heavily on the sector. Service businesses such as care, hospitality and professional services usually run much higher labour cost percentages than capital-intensive manufacturing or retail with high stock costs. Compare against your own history and similar businesses rather than a single universal number.

Include gross wages and salaries, overtime, bonuses, employer social security or National Insurance contributions, employer pension contributions, benefits, and agency or contractor costs for people doing core work. Keep the definition the same every period so trends are meaningful.

Look at where paid hours go: premium overtime, absence cover, shifts that do not match demand, and paid time that is not worked. These often explain a rising percentage better than headcount does. TeamzMate connects attendance, schedules and payroll hours to show which of these is driving the change.