Calculate your labour cost ratio & improve profit margins
Work out what percentage of your revenue goes on labour. Compare payroll against revenue to assess staffing efficiency and profitability.
This calculator provides general estimates only. Labour cost benchmarks and targets vary by industry and business model, and this is not financial or payroll advice — verify figures with your accountant before making business decisions. It does not constitute legal, HR, or professional advice and should not be relied on as a substitute for advice specific to your business, workforce, or circumstances.
Labour cost percentage calculator
Enter revenue and payroll for the same period. Add on-costs and a target in the advanced options.
Your labour cost percentage
Estimates only — verify before making decisions.
What is labour cost percentage?
Labour cost percentage shows how much of your revenue is spent on staffing. It’s one of the most important indicators of profitability for Australian businesses, particularly in service industries.
The calculation is straightforward: divide your total payroll cost by your revenue for the same period, then multiply by 100. This gives you a percentage you can track over time and compare against industry benchmarks.
The formula: Labour cost % = (Payroll ÷ Revenue) × 100. Example: $30,000 payroll ÷ $100,000 revenue = 30%.
What is a good labour cost percentage?
There’s no universal answer — the right percentage depends heavily on your industry, business model and operating costs. However, some general patterns emerge:
Hospitality: 25–35%
Tight margins and high competition require careful cost control.
Retail: 15–25%
Varies based on product margins and customer service level.
Professional services: 40–60%
Labour is the primary value proposition in service businesses.
Healthcare: 50–70%
Higher mandated staffing requirements drive labour costs.
Rather than chasing a specific number, focus on understanding what’s normal for your industry and tracking your own trends over time. A sudden increase may signal overstaffing or declining revenue, while a sharp decrease could indicate understaffing risks.
How to reduce labour cost percentage
If your labour cost percentage is higher than you’d like, there are several strategies to consider:
Optimise your rosters
Match staffing levels to actual demand. Avoid over-rostering during quiet periods and ensure the right mix of skill levels — see our rostering software.
Reduce unnecessary overtime
Overtime attracts significant penalty rates. Better planning and cross-training can reduce reliance on overtime hours.
Match staffing to demand
Use historical data to predict busy and quiet periods, and schedule experienced staff when they’re most needed.
Track actual vs forecast hours
Compare rostered hours against actual hours worked, identify where hours are being added, and address the root causes.
Want to keep labour costs under control?
Upgrade to RosterElf for real-time labour cost tracking, roster costing and automatic budget alerts.
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Perfect for quick labour percentage checks
- Calculate labour cost percentage
- Compare against target benchmarks
- Include on-costs in calculations
- No signup required
- Real-time labour cost tracking
- Budget alerts & notifications
- Payroll export (Xero & MYOB)
- Automatic award interpretation
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Frequently asked questions
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Divide your total labour cost by your revenue for the same period, then multiply by 100: labour cost % = (payroll ÷ revenue) × 100. For example, $30,000 payroll on $100,000 revenue = 30%. Include on-costs (super, payroll tax, workers’ comp) in the payroll figure for a truer number.
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Labour cost % = (total labour cost ÷ total revenue) × 100. “Total labour cost” ideally includes gross wages plus on-costs like superannuation (12%), payroll tax, workers’ compensation and leave loading. Use the advanced options above to add on-costs.
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For an accurate figure, include gross wages plus on-costs: superannuation, payroll tax, workers’ compensation, leave loading and casual loading where applicable. The advanced options let you add payroll tax, workers’ comp and other on-costs.
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Yes. The formula is the same for any period — just make sure your revenue and payroll cost cover the same time period (both weekly, both monthly, etc.).