Labor Cost Calculator
Calculate the true cost of employees including wages, benefits, taxes, and overhead
Employee Information
Gross Pay Calculation
Standard full-time is 40 hours
Net Hours Worked
Holidays, sick days, vacation
Additional Annual Costs
Labor Cost Percentage (Optional)
Enter to calculate labor cost as percentage of revenue
Labor Cost Analysis
Cost Breakdown
Hourly Cost Analysis
Example: Restaurant Employee
Employee Details
Position: Restaurant Server
Hours: 40 hours/week, 2,080 hours/year
Pay Rate: $10.00/hour
Absent Days: 15 days/year (holidays, sick, vacation)
Revenue: $80,000 annually
Cost Calculation
Gross Pay: 2,080 × $10.00 = $20,800
Additional Costs: $3,900 (taxes, insurance, benefits)
Total Annual Cost: $20,800 + $3,900 = $24,700
Net Hours Worked: 2,080 - 120 = 1,960 hours
True Hourly Cost: $24,700 ÷ 1,960 = $12.60
Labor Cost %: $24,700 ÷ $80,000 = 30.9%
Calculation Steps
Calculate Gross Pay
Hours per week × 52 × pay rate
Find Net Hours
Subtract absent days from total hours
Add Additional Costs
Taxes, benefits, insurance, overtime
Calculate True Cost
Total cost ÷ net hours worked
Common Labor Costs
- • Base wages/salary
- • Overtime pay
- • Bonuses & commissions
- • Social Security (6.2%)
- • Medicare (1.45%)
- • Unemployment taxes
- • Health insurance
- • Retirement contributions
- • Paid time off
- • Training & development
- • Equipment & supplies
- • Worker's compensation
Cost Reduction Tips
Minimize overtime hours
Reduce employee turnover
Offer performance-based pay
Consider automation opportunities
Optimize scheduling and productivity
Review benefit plan costs regularly
Understanding Labor Costs
What Are Labor Costs?
Labor costs represent the total expense of employing workers, including not just wages but all associated costs such as benefits, taxes, insurance, and overhead. Understanding true labor costs is essential for accurate budgeting and pricing decisions.
Why Calculate True Labor Costs?
- •Accurate project pricing and budgeting
- •Better hiring and compensation decisions
- •Cost control and efficiency analysis
- •Compliance with labor regulations
Key Formulas
Gross Pay =
Hours per Week × 52 × Pay Rate
Net Hours =
Gross Hours - (Absent Days × Hours/Day)
True Hourly Cost =
(Gross Pay + Additional Costs) ÷ Net Hours
Direct vs. Indirect Labor Costs
Direct Labor Costs
- • Wages for production workers
- • Direct manufacturing labor
- • Employee-specific benefits
- • Directly traceable to products/services
Indirect Labor Costs
- • Support staff and supervision
- • Maintenance and quality control
- • Administrative overhead
- • Shared across multiple activities