What your workforce actually costs, against what the business brings in. Most versions of this number count payroll and stop, which understates it substantially. Every number on this page is calculated in your browser and never leaves your device.
Labor cost as a percent of revenue earns its keep when you watch the direction it moves as revenue and headcount change. The HRAnalyst™ Workbook is a printable tracker for every calculator on this site, with the formula, the recommended cadence and space for four quarters. Join the list and we will send it, along with new calculators and workforce analytics as they publish.
Formula used
Labor Cost Total = Payroll + Employer Taxes + Benefits + Contractor Spend
Labor Cost Percent = (Labor Cost Total ÷ Revenue) × 100
Component Share = (Component ÷ Labor Cost Total) × 100
Contractor and temp spend is optional and is treated as zero when it is left blank. Revenue and every cost you enter must cover the same period, otherwise the ratio compares two different things. Component shares divide each component by total labor cost, not by revenue, so they add up to one hundred percent of the labor cost rather than of the revenue. A result above one hundred percent is possible and correct when labor cost exceeds revenue for the period.
A payroll only version of this number is the one most people report, and it can understate the real figure by a third or more once employer taxes and benefits are counted. If you are comparing your number to one you saw elsewhere, check what was in the numerator before you conclude anything.
Contractor spend belongs in labor cost even though it never touches payroll. Leaving it out while counting the output those contractors produced makes the ratio look better than the business is performing.
Employer payroll taxes and employer paid benefits are labor cost. A payroll only figure is a smaller, different number, and reporting it as labor cost understates what the workforce costs the business.
Contract and temp labor does the work and shows up in the revenue, so it belongs in the cost side too. Excluding it while keeping the revenue it helped produce flatters the ratio.
Where a large share of revenue is money passing straight through to suppliers or subcontractors, the denominator is not something your workforce produced, and the ratio becomes meaningless. Decide which revenue base you are using and say so alongside the number.
The calculators and content on HRAnalyst are provided for informational purposes only and do not constitute legal, tax, or accounting advice. Compensation and compliance obligations vary by jurisdiction. Consult qualified counsel before acting on any result.
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