Labor cost percentage calculator
Labor cost percentage is total labor cost divided by sales, times 100. Enter hours, average hourly wage and sales for the period; the calculator adds the 7.65% employer share of Social Security and Medicare and shows the result. It runs in your browser and saves nothing.
The formula
Labor cost % = (wages + employer payroll taxes) ÷ sales × 100. The employer share of FICA is 6.2% Social Security plus 1.45% Medicare = 7.65% of wages (IRS Topic 751). State unemployment tax, workers' compensation and benefits are not included; add them to wages if you want a fuller number.
Example: 420 hours × $15.00 = $6,300 in wages. $6,300 × 1.0765 = $6,781.95 labor cost. $6,781.95 ÷ $28,000 sales = 24.2%.
Compare locations
| Location | Hours | Avg wage | Sales | Labor % |
|---|---|---|---|---|
| Store A | 420 | $15.00 | $28,000 | 24.2% |
| Store B | 380 | $15.50 | $21,000 | 30.2% |
Store B: 380 × $15.50 = $5,890 wages; × 1.0765 = $6,340.59; ÷ $21,000 = 30.2%. Store B works fewer hours at a higher wage, and its sales are lower, so its labor share is higher.
Questions
How do you calculate labor cost percentage?
Divide total labor cost (wages plus employer payroll taxes) by sales for the same period and multiply by 100.
What payroll tax does an employer pay on wages?
The employer pays 6.2% Social Security and 1.45% Medicare, 7.65% in total, per IRS Topic 751.
Does labor cost include salaried managers?
Include every wage you pay for the period if you want total labor cost; use hourly staff only if you want to compare scheduling choices between stores.
Sources
- IRS Topic no. 751, Social Security and Medicare withholding rates (checked 2026-11-12)