How to Figure the Gross Percent of Payroll
Labor costs factor heavily into a businesses budget. Keeping the cost of labor under control requires monitoring its impact into the overall cost of doing business. Small business owners can monitor the expense of labor by converting the cost of payroll into a percentage. Converting a cost into a percentage provides the business owner perspective. Without this perspective, payroll costs are simply dollar figures and provide no real information to gauge the labor cost against the overall cost of doing business.
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Instructions
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Determine and itemize each expense the business has. For example, company A has $11,800 in expenses. Determine each expense, and its amount individually, such as warehouse expenses, utility expenses, transportation expenses and marketing.
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Total the entire amount of business expenses for the time period needed. For example, company A has the following expenses in a month: warehouse rent is $3,000; utilities are $800; transportation is $2,000; payroll is $4,500; and marketing is $1,500. The total amount of expenses each month for company A is $11,800.
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Divide the payroll cost by the amount of the total expenses. If company A has $4,500 in payroll expenses and $11,800 in total expenses, then $4,500 divided by $11,800 equals .38 or 38 percent. Company A therefore pays 38 percent of its gross expenses to payroll.
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Tips & Warnings
Your gross expenses are the total amount of money you pay for for the operation and function of your business. Do not deduct any taxes, insurance, retirement contributions or other applicable deductions from your employee's payroll when figuring the gross percentage.
