Labor Cost Percentage

Common P&L and staffing ratio. Include benefits/taxes if your finance definition of labor cost does.

Labor cost % = (payroll + burden as defined ÷ revenue) × 100.

Tip: Keep “Total Labor Cost” and “Revenue” on the same basis (period, units, and population) before calculating Labor Cost Percentage.

Cluster: HR hub · Professional KPIs · Percentage guide

Labor cost percentage shows how much of revenue goes to people costs.

Enter total labor cost and revenue for the same period and entity.

$
Payroll and included burden
$
Revenue for the same period

Labor Cost %

Understanding Labor Cost Percentage

How we calculate. Labor cost % = (payroll + burden as defined ÷ revenue) × 100. The form uses the same arithmetic as the worked examples on this page. See our methodology and accuracy policy.

Real-world scenario: A typical Labor Cost Percentage case uses total labor cost 400000 and revenue 2000000. Enter the same figures below to reproduce the worked path.

What is Labor Cost Percentage?

Common P&L and staffing ratio. Include benefits/taxes if your finance definition of labor cost does.

  • Match accounting definitions
  • Exclude contractors if tracked elsewhere—or include consistently
  • Compare same industry for benchmarks

The Formula

Labor Cost Percentage
Labor cost % = (Total labor cost ÷ Revenue) × 100

Worked Example

Scenario: Labor cost $400,000 on $2,000,000 revenue.
Step 1: Labor = 400000
Step 2: Revenue = 2000000
Step 3: % = (400000 ÷ 2000000) × 100 = 20%
Answer: Labor cost percentage is 20%.

Common Use Cases

  • Budgeting: headcount plans
  • Store ops: labor vs sales
  • Investor packs: efficiency narrative

Pro Tips

  • Use fully loaded cost when comparing sites
  • Watch seasonality
  • Separate COGS labor if needed

Limitations: Labor Cost Percentage results are educational HR planning aids—not legal, payroll, or employment advice. Confirm definitions with your HR/finance policies.

FAQ

Gross or net revenue?

Use the revenue definition your finance team uses for this KPI—usually recognized revenue.

Include contractors?

Only if your labor-cost definition includes them; otherwise report contractor spend separately.

Authoritative References

For people-analytics definitions, consult:

  • SHRM — HR metrics and workforce standards
  • ISO 30414 — human capital reporting guidance
  • U.S. BLS — labor statistics context