Calculate labor cost percentage, the share of sales or revenue spent on labor, from total labor cost and revenue, or solve for either amount.

Wages plus payroll taxes and benefits, for the same period as revenue.

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Labor Percentage Formula

The following formula is used to calculate a labor percentage.

Lp = TPC / TR × 100
  • Where LP is your labor percentage in terms of total revenue (%)
  • TPC is your total payroll costs (labor) ($)
  • TR is revenue for the same period and business scope as the labor cost

To calculate a labor percentage, divide the total payroll costs by the total revenue generated as a result of the labor, then multiply by 100.

Labor Percentage Definition

What is a labor percentage?

A labor percentage is a ratio, expressed as a percent, of the total cost of labor with respect to the total revenue generated from that labor.

Define labor cost consistently for the business or segment being analyzed. Depending on that scope, it may include wages, benefits, employer payroll costs and other labor expenses. Revenue must be positive; labor cost can exceed revenue, producing a percentage above 100%.

How to calculate labor percentage?

Labor Percentage Example Problem:

First, determine your total revenue generated in the business or segment being analyzed. In this example problem, a business generated $50,000.00 worth of revenue in the last month.

Next, determine the total labor costs that went into generating that revenue. This should include both direct labor (payroll) and benefits/OT/bonuses.

For this example, the total labor costs were $30,000.00.

Finally, calculate the labor percentage using the formula above:

L% = TPC / TR * 100

L% = 30000 / 50000 * 100

L% = 60%