Percentage of staff costs over total revenue
📊 What is Labour Cost Ratio?
This ratio indicates the share of labour expenses in relation to total revenue. It includes all salary-related costs: fixed, variable, and employer contributions.
🧮 Formula of Labor Cost Ratio
Labour Cost Ratio = (Labour costs / Total revenue) × 100
✅ Why is it important?
- Measures team productivity and efficiency.
- High ratio = possible overstaffing or inefficiencies.
- Low ratio = cost-efficient operations (but check service quality).
📘 Practical example of Labor Cost Ratio
Labour costs: €50,000
Total revenue: €200,000
Labour Cost Ratio = (50,000 / 200,000) × 100 = 25%
👉 Shows how much of your revenue goes to paying wages and salaries.
