What Percentage of Revenue Should Go to Payroll?

Recently, we asked ourselves, “What Percentage of Revenue Should Go to Payroll?” We weren’t sure, so we looked for a quick and easy tool to assess the payroll health of Dragonfly Digital Marketing. We didn’t find anything, so we created an assessment tool that we could use internally. Since payroll is a huge contributor to a business’s expenses, we decided to base our assessment tool on that. We know many other businesses are also curious about their health, so we’ve made our tool available here for free.

Here are the instructions:

  1. Using your accounting tool, run a profit and loss report for any timeframe.
  2. Enter Revenue (Total Income) during your chosen timeframe.
  3. Enter the total number of hours worked by employees during that timeframe.
  4. Receive calculation for the amount of revenue you make per hour worked.
  5. Enter Labor and Contract Labor
  6. Receive percentage of revenue that goes to payroll.
  7. Select your industry and receive an assessment.

Recommended Percentage of Revenue to Payroll by Business Type / Industry:

Manufacturing: < 30%
Consulting: < 75%
Service: < 60%
Retail: < 20%
Construction: < 25%
Hospitality: < 35%
Restaurant: < 35%
Scientific and Tech Services < 45%
Healthcare < 45%

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