Labour cost percentage calculator: wages as a share of sales
Labour cost percentage is the period's wages, with the leave they earn, employer KiwiSaver and ACC levies, divided by sales excluding GST, times 100. Type the sales, the hours worked and the average rate, and any salaries. The calculator gives the percentage, how far it is from your target in dollars and hours, and the sales that would meet the target.
Worked out for the example. Change the boxes to make it yours.
| Sales excluding GST ($40,250 less 3/23) | $35,000.00 |
|---|---|
| Wages: 310 hours at $27.50 | $8,525.00 |
| Salaries | $1,500.00 |
| Leave earned on that pay (8%) | $802.00 |
| Employer KiwiSaver: 3.5% | $378.95 |
| ACC levies at $0.48 per $100 | $51.97 |
| Labour cost, a week | $11,257.91 |
| Labour cost as a share of sales | 32.2% |
| Cost of one more hour, with leave and on-costs | $30.88 |
| Labour cost at your target of 30% | $10,500.00 |
| Over the target by | $757.91 |
| Hours over the target, at the average rate | 24.54 hours |
| Sales excluding GST that would meet the target | $37,526 |
| The same, including GST | $43,155 |
- Sales are counted without GST, because the GST belongs to Inland Revenue.
- Leave earned is 8% of the pay, the rate the Holidays Act pays leave built since the last anniversary at. Untick it if the wages already include 8% holiday pay paid with each pay, so it is not counted twice.
- No law or official figure sets a labour cost target: it is your own, from your margins and your kind of business.
- Public holiday pay, overtime and penal rates count as wages: put them in the average rate or the salaries if they were paid in the period.
Team timesheets shows the hours staff choose to share, by person, project and task, with a CSV ready for payroll, so the wage line is hours worked, not the roster. Optional approvals, billable and private cost rates, hours budgets and team invoices are all included in the seat. It never reads the pay or rates in anyone's own account.
See Team timesheetsHow labour cost percentage is worked out
The calculator adds the wages for the hours worked and any salaries, then the cost that comes with that pay: 8% for the leave it earns, employer KiwiSaver of at least 3.5% of gross pay for contributing employees aged 16 to 64, and ACC levies at your industry's work levy rate plus the Working Safer levy of 8 cents per $100. It divides that by sales excluding GST and multiplies by 100. Sales leave GST out because the 15% belongs to Inland Revenue: the GST in a GST-inclusive total is 3/23 of it, so $40,250 of takings is $35,000 of sales. Use the hours actually worked, from timesheets, rather than the hours rostered, because pay follows the hours worked.
Why leave is added at 8%
Every hour a permanent employee works builds annual holidays they will be paid for later. The Holidays Act 2003 pays leave built since the last anniversary at 8% of gross earnings when employment ends (sections 23 and 25), so 8% of the period's pay is a fair cost to set against the sales that pay earned. Staff paid 8% holiday pay with each pay already have it in their wages, so untick the box if that is your whole team. If only some are, the box adds 8% to their pay a second time and the result reads a little high. Sick leave, public holidays and alternative holidays are not added; they show up as wages in the periods when they are paid. Our cost of an employee calculator works out the full yearly cost for one person.
Reading the result against a target
No law or official figure sets a labour cost target, and the right figure depends on your prices, margins and how much of what you sell is made on site. Set your own, then use the result three ways. The gap in dollars is what the period cost above or below the target. The gap in hours divides that by the cost of one more hour, with leave and on-costs, which is what changing the roster would move. The sales needed are what the same labour would need to come in on target. Compare the same weekday or week across periods: a quiet week with a steady team always reads high. Our article on rosters and timesheets covers why the hours worked differ from the roster, and getting timesheets into payroll covers the export.
Questions
How do you calculate labour cost percentage?
Add the wages and salaries for the period, plus the on-costs that come with them: leave earned, employer KiwiSaver and ACC levies. Divide by sales excluding GST for the same period and multiply by 100. $11,258 of labour against $35,000 of sales is 32.2%.
Should labour cost percentage use sales with or without GST?
Without. The GST in your takings belongs to Inland Revenue, so it is not sales you can pay wages from. Take 3/23 off a GST-inclusive figure: $40,250 including GST is $35,000 excluding it.
What is a good labour cost percentage for a cafe in NZ?
No official figure sets one. It depends on your prices, your margins and how much is made on site, so set a target from your own figures and track it week by week against the same week last year.
Do I include KiwiSaver and ACC in labour cost?
Yes, if you want the real cost. Employer KiwiSaver is at least 3.5% of gross pay for contributing employees, and ACC levies are charged on payroll at your industry's rate plus the Working Safer levy. Both rise and fall with wages.
How many hours do I need to cut to hit my labour target?
Divide the dollars over target by the cost of one more hour, with leave and on-costs. In the example, $757.91 over target at $30.88 an hour is about 24.5 hours in the week.
Where do I get the hours worked for the week?
From timesheets rather than the roster. Team timesheets at jobtracker.co.nz shows the hours staff choose to share, by person, project and task, for any period, with a CSV ready for payroll. It does not track sales; your till or accounts do.
Sources
- Inland Revenue: charging GST.
- Holidays Act 2003.
- Inland Revenue: employer contributions to KiwiSaver schemes and complying funds.
- business.govt.nz: ACC levies.
- Accident Compensation (Work Account Levies) Regulations 2025, Schedule 2: rates for 2026/27.
- Health and Safety at Work (Rates of Funding Levy) Regulations 2016.
- Minimum Wage Order 2026 (SL 2026/16).
More free tools: see all the calculators.