Enter your labour costs and revenue for any given period to calculate your Labour Cost Percentage. See exactly what share of your sales is going toward wages — a critical metric for shift-based businesses like restaurants, construction, and field service companies.
Labour Cost Percentage
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Non-Labour Revenue Percentage
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Total Labour Costs
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Non-Labour Revenue
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Labour cost percentage is the ratio of your total labour costs to your total revenue, expressed as a percentage. It tells you how much of every dollar (or pound) you earn goes toward paying your workforce. For example, if you spend $1,000 on labour and bring in $5,000 in revenue, your labour cost percentage is 20%.
The formula is simple: divide your total labour costs by your total revenue, then multiply by 100. So if labour costs are $2,000 and revenue is $8,000, the calculation is (2,000 ÷ 8,000) × 100 = 25%. Our calculator does this automatically once you enter both figures.
A healthy labour cost percentage varies by industry. Restaurants typically aim for 25–35%, while retail businesses may target 15–20%. Construction and field service companies often see higher percentages. The key goal is to keep it below 100% and trending as low as sustainably possible without compromising service quality.
Labour costs include all direct and indirect wage-related expenses: hourly wages, salaries, overtime pay, payroll taxes, employee benefits, and any bonuses or commissions. For the most accurate percentage, include every cost associated with employing your workforce during the period you're measuring.
For shift-based businesses, calculating weekly gives you the fastest feedback loop to spot problems early. Monthly tracking is the minimum recommended frequency. Comparing across weeks, months, and seasons helps you identify trends and make smarter staffing decisions.
Common causes include overstaffing during slow periods, excessive overtime, low sales volume, or a mismatch between scheduled hours and actual demand. Reviewing your shift schedules, improving demand forecasting, and cross-training staff to cover multiple roles can all help bring the percentage down.
Technically yes — if your labour costs are higher than your revenue, the percentage exceeds 100%, meaning you are losing money purely on labour before accounting for any other expenses. This is a red flag that requires immediate action, such as cutting hours, boosting sales, or re-evaluating your pricing strategy.
Yes, they refer to the same metric. Some industries call it the labour cost ratio, labour percentage, or wage-to-revenue ratio — but the underlying calculation (labour costs ÷ revenue × 100) is identical regardless of the terminology used.