Labour Cost as % of Sales
Total staff costs as a percentage of total sales revenue, the primary workforce efficiency metric in retail and hospitality
What is Labour Cost as % of Sales?
Labour cost as a percentage of sales is the share of sales revenue spent on labour. It shows how efficiently a retailer uses its staff to generate sales.
Labour is one of the largest costs in retail, so managing this ratio is central to profit.
How this KPI is measured
- Function
- Human Resources
- Sub-function
- Workforce Planning
- Industry
- Retail
- Type
- Lagging
- Impact
- Efficiency
- Unit
- %
- Measurement frequency
- Weekly / Monthly
- Formula
- (Total labour costs / Total sales revenue) × 100
How to calculate it
Divide total labour costs by total sales revenue, and multiply by 100.
For example, if labour cost was 180,000 and sales were 1,000,000, the ratio is 18%.
Include wages, overtime, employer taxes and benefits, and look at the ratio by store and by day, so staffing can be matched to sales.
Where it is used
Managing store profitability
Control labour cost.
Planning staffing
Match hours to demand.
Comparing stores
Find efficient practices.
How to improve it
Tips and common mistakes
- Cutting labour too far hurts service and sales.
- Consider productivity, not only the ratio.
- Account for minimum staffing needs.
More Human Resources kpi library
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