Hiring dataRead at source, 30 September 2026
Labor Cost as a Percentage of Revenue, by Industry
Labor cost percentage = total labor cost ÷ revenue × 100, where labor cost is wages plus employer payroll taxes, benefits and contract labor for the same period. There is no single normal figure. From the Census Bureau’s 2022 Economic Census, payroll alone ran from 8.5% of revenue in food manufacturing and 8.8% in retail to 30.1% in restaurants and 48.6% in home health care. Adding benefits at BLS June 2026 shares lifts each by roughly a quarter to a half. The table below gives both, by industry.
How to calculate labor cost as a percentage of revenue
The formula is one line:
Labor cost % = (wages + employer payroll taxes + benefits + contract labor) ÷ revenue × 100, for the same period.
The argument is always about what goes on top of the line. Include:
- Gross wages and salaries, including overtime, bonuses, commissions, paid leave and tips you report through payroll.
- Employer payroll taxes: the employer half of Social Security and Medicare, federal and state unemployment tax, and workers’ compensation premiums.
- Benefits you pay for: health insurance, retirement contributions and other employer-paid benefits.
- Contract and agency labor doing work your employees would otherwise do. Leave it out and a business that moves shifts to an agency looks cheaper than it is.
Use a whole month, quarter or year, not a single week, so seasonal peaks and quarterly tax payments don’t distort it. Our employee cost calculator builds the per-employee side of the numerator: taxes, benefits and the one-time cost of hiring.
A worked example: a home care agency with $2,000,000 in annual revenue, $900,000 in wages, $110,000 in employer taxes and workers’ compensation and $90,000 in benefits has a labor cost of $1,100,000, or 55.0% of revenue. Its payroll-only figure is 45.0%.
Labor cost as a percentage of revenue by industry
The payroll column is Census data, divided: 2022 annual payroll ÷ 2022 sales, shipments or revenue, for every establishment in the industry nationally. The Census definition of payroll covers salaries, wages, tips, commissions, bonuses, paid leave and employee pension contributions, and excludes “employer’s costs for fringe benefits such as payroll taxes, employer-paid insurance premiums, pension plans, and other employer-paid benefits.” So the payroll column is a floor.
The estimate column approximates the full cost by dividing that payroll share by the share of total compensation that wages make up in the industry, from BLS ECEC for June 2026. For example, restaurants: 30.07% ÷ 0.808 = 37.2%. We divide the unrounded payroll share, so dividing the rounded figure shown can differ by 0.1 point.
| Industry | Payroll ÷ revenue, 2022 | Estimated with benefits and payroll taxes | Wages as % of total compensation, June 2026 (ECEC industry) |
|---|---|---|---|
| Construction | 18.1% | 26.1% | 69.5% (construction) |
| Specialty trade contractors | 25.0% | 35.9% | 69.5% (construction) |
| Manufacturing | 11.5% | 17.2% | 66.9% (manufacturing) |
| Food manufacturing | 8.5% | 12.7% | 66.9% (manufacturing) |
| Retail trade | 8.8% | 11.5% | 76.5% (retail trade) |
| Grocery and convenience retailers | 10.2% | 13.3% | 76.5% (retail trade) |
| Truck transportation | 22.9% | 34.7% | 66.1% (transportation and warehousing) |
| Hospitals | 35.2% | 53.6% | 65.6% (hospitals) |
| Nursing care facilities | 42.5% | 58.8% | 72.3% (nursing and residential care) |
| Assisted living and continuing care communities | 39.6% | 54.8% | 72.3% (nursing and residential care) |
| Home health care services | 48.6% | 69.1% | 70.4% (health care and social assistance) |
| Restaurants and other eating places | 30.1% | 37.2% | 80.8% (accommodation and food services) |
| Hotels and other traveler accommodation | 23.2% | 28.8% | 80.8% (accommodation and food services) |
| Janitorial services | 43.3% | 58.0% | 74.6% (administrative and support services) |
| Landscaping services | 32.3% | 43.3% | 74.6% (administrative and support services) |
| Automotive repair and maintenance | 27.2% | 36.7% | 74.1% (other services) |
How to read it honestly:
- It is the industry, not a target. Each row averages large and small firms and different service models. Use it to see whether you are in the right range, not to set a budget.
- The estimate mixes years. Payroll and revenue are 2022; the wage share is June 2026. Wage shares move slowly (the private-industry figure was 70.5% in the fourth quarter of 2022 and 70.0% in June 2026), but the estimate column is an estimate.
- Agency labor is not in either column. Census payroll counts only employees on the establishment’s own payroll, so industries that lean on temps or subcontractors look cheaper here than they are.
- Revenue means different things. For manufacturing it is the value of shipments; for retail and grocery it includes the goods resold, which is why their percentages are low.
We left warehousing out: in the 2022 data its payroll ($66.5 billion) is larger than its receipts ($60.3 billion), so a revenue ratio for that industry is not meaningful.
Restaurants
The Census numbers split restaurants into full-service, where payroll was 34.4% of 2022 sales, and limited-service, at 26.1%. All restaurants and other eating places together were 30.1%. We keep restaurant detail in one place: our restaurant labor costs page builds a more current wages-only figure from monthly BLS and Census data, tracks how it has moved since 2017 and has a calculator for your own weekly numbers.
Why frontline industries run higher, and how turnover and vacancy inflate it
The pattern in the table is simple. Where the product is a person’s time — a home care visit, a cleaned building, a delivered load, a served table — labor is most of what the customer pays for, and the percentage is high. Where the product is goods, materials and merchandise carry the revenue and labor is a smaller slice.
Two frontline costs push the number above where the wage rate alone would put it:
- Turnover. Every replacement repeats advertising, screening, onboarding and training hours, and a new hire produces less while learning the job. None of that raises the wage rate, but all of it is in the labor line. The full list of what goes into the cost of a hire is on cost of recruiting.
- Vacancy. An open shift is rarely left unworked. It is covered by overtime at one and a half times the regular rate for hours over 40 in a week under the Fair Labor Standards Act (some states add daily rules; see overtime laws by state), or by an agency worker billed with a markup. Either way you pay more for the same hour. Our cost of vacancy calculator puts a number on it for your roles.
That is why two operators with the same wage scale can run labor percentages several points apart. The difference is usually how many hours they buy at premium rates while seats sit empty.
Lowering the number without cutting pay
Cutting pay lowers the percentage on paper and makes every seat harder to fill. The levers that last are the premium hours:
- Shorten time-to-fill. Every day a role is open is a day of overtime or agency cover. Measure it by role (time to fill) and fix the slowest stage first; for most frontline roles that is getting enough qualified applicants and calling them back fast.
- Track overtime that is caused by vacancies. Separate overtime used by choice from overtime that covers an open seat. The second kind stops when the seat is filled.
- Move recurring agency hours onto your payroll. Agency cover is worth its premium for a genuine spike. For the same shifts every week, a direct hire is cheaper per hour; the premium is laid out on staffing agency markup.
- Pay at the market, then hold people. Being slightly under market often costs more in turnover than it saves on the rate. How much to pay employees covers finding the local rate.
Then recalculate the percentage the same way each quarter, with the same items in the numerator, so a change reflects your operation rather than your accounting.
Frequently asked questions
What is a normal labor cost as a percentage of revenue?
It depends on the industry. In the 2022 Economic Census, payroll alone was 8.8% of revenue in retail, 11.5% in manufacturing, 18.1% in construction, 22.9% in trucking, 30.1% in restaurants and 42.5% in nursing care facilities. Adding benefits and payroll taxes raises each by roughly a quarter to a half.
How do you calculate labor cost percentage?
Add wages, employer payroll taxes, workers’ compensation, benefits and contract labor for a period, divide by revenue for the same period, and multiply by 100. Example: $1,100,000 in labor cost on $2,000,000 of revenue is 55.0%. Use a month or longer so peaks and quarterly taxes do not distort it.
What is a good labor cost percentage for a restaurant?
In the 2022 Economic Census, payroll was 34.4% of sales at full-service restaurants and 26.1% at limited-service ones, before benefits and payroll taxes. Your concept and prices matter more than any rule of thumb. Our restaurant labor costs page has a current wages-only figure and a calculator.
What percentage of revenue should go to payroll?
There is no universal right answer. Compare yourself with your own industry: payroll alone ranged from under 10% of revenue in retail and food manufacturing to nearly half in home health care in the 2022 Economic Census. Then watch your own trend, because a rising share without a pay increase usually means overtime or agency hours.
Does labor cost include benefits and payroll taxes?
It should. Wages were 70.0% of private-industry compensation in June 2026, according to BLS, so benefits and legally required costs such as Social Security, Medicare, unemployment insurance and workers’ compensation were the other 30.0%. A payroll-only figure understates labor cost.
How do vacancies affect labor cost?
An unfilled shift is usually covered by overtime at one and a half times the regular rate or by agency labor with a markup, so the same hours cost more. Faster hiring cuts those premium hours; our cost of vacancy calculator estimates the cost for your roles.
Fewer empty shifts, fewer premium hours
Boostpoint is recruitment marketing software for frontline employers in healthcare, trucking, skilled trades, manufacturing, agriculture and hourly roles: it turns your open jobs into targeted Facebook and Instagram ads, builds and optimizes the campaigns, collects applicants through a one-minute mobile application with automated text follow-up, and delivers them into your ATS — with a customer success team there to support you.
Book a DemoSources: U.S. Census Bureau, 2022 Economic Census, Selected Statistics by industry (EC2200BASIC), national, all establishments; Census Bureau definition of annual payroll; U.S. Bureau of Labor Statistics, Employer Costs for Employee Compensation, wages and salaries as a percent of total compensation, private industry by industry, June 2026 (and fourth quarter 2022). Ratios are Boostpoint calculations; the benefits-adjusted column is an estimate. Not financial advice. Read at source 30 September 2026.