Labor Cost Percentage Calculator
Total labor as a percentage of revenue, against the benchmark for your business.
Your numbers
Your result
- Total burdened labor cost
- $797,880
- Labor cost as % of revenue
- 53.2%
- Field labor as % of revenue
- 28.9%
- Payroll burden rateTaxes, workers comp and benefits as a percentage of wages.
- 19.6%
- Dollars over your 32% target
- $317,880
- Revenue per labor dollarHow much revenue each dollar of labor produces. Higher is better.
- $1.88
53.2% of revenue goes to labor
You're well over target — about $317,880 a year. At this level you either need higher prices, higher productivity per labor hour, or fewer people. Paying more without changing price is how this number gets here.
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What this number actually tells you
Labor is the largest controllable cost in almost every service business, and labor percentage — total burdened labor divided by revenue — is the number that tells you whether it's under control. Not the wage you pay. The percentage.
The word that matters is burdened. Raw wages understate real labor cost by 15% to 30% once you add payroll taxes, workers comp, benefits and overtime premium. If you've been managing to a wage number instead of a burdened percentage, your labor cost is higher than you think.
Labor percentage is also the number that connects wages to pricing. When the market pushes wages up, the only sustainable responses are raising price or raising output per labor hour. Absorbing it is the option that quietly kills margin.
How the math works
- 01Total wages = field wages + office wages + owner compensation + overtime premium.
- 02Burden = wages × payroll tax % + wages × workers comp % + benefits paid.
- 03Total burdened labor = wages + burden + contract labor.
- 04Labor cost % = total burdened labor ÷ revenue × 100.
- 05Revenue per labor dollar = revenue ÷ total burdened labor. A ratio of 3.0 means every labor dollar produces $3 of revenue.
What to do with the answer
- Track it monthly and by division. A company-wide number hides the crew or service line that's underwater.
- Separate field labor from office labor. Field labor belongs in gross margin; office labor is overhead. They behave differently and need different targets.
- Watch overtime premium as its own line. It's the earliest signal that capacity, scheduling or staffing is off.
- When wages rise, move price or productivity in the same quarter. Waiting a year turns a wage increase into a margin problem.
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Schedule Your Growth Assessment Or call (737) 888-0415Questions owners ask about this
What is a good labor cost percentage?
For most established service and trade businesses, 25–35% of revenue in total burdened labor is a healthy band, with field labor alone typically 20–28%. Restaurants often target 28–32%, and labor-only services run higher. Set your target from your own gross margin requirement rather than a generic number.
What should I include in labor cost?
All wages including yours, overtime premium, payroll taxes, workers compensation, benefits, and contract or 1099 labor doing work employees would otherwise do. Excluding any of those makes the percentage look better and the decisions worse.
My labor percentage is too high. Do I need to cut people?
Usually not first. High labor percentage is more often a pricing or productivity problem than a headcount problem. Check your billable-hour ratio, your average ticket and your close rate before cutting the capacity that generates revenue.
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