Enter your total revenue and your total payroll costs into the calculator to determine your labor percentage.

Labor Percentage Formula

The following formula is used to calculate a labor percentage.

L% = TPC / TR * 100

  • Where L% is your labor percentage in terms of total revenue (%)
  • TPC is your total payroll costs (labor) ($)
  • TR is your total revenue generated as a direct result of that labor

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.

It’s important to note that in the calculation of a labor percentage, those payrolls and labor costs are only included if they are directly resulting in the production or process of making the revenue being analyzed.

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) as well as 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%