Labor Cost Calculator

The labor cost calculator calculates the per-hour labor costs and labor cost percentage. You can also estimate the payable taxes, gross income, and net hours worked per year by the cost of a labor calculator.

Why Calculate Labor Costs?

“Being an employer, it is quite essential to calculate the cost of an employee per year”.

The same goes for the employees to calculate their per annum income. You can calculate labor costs with our efficient labour calculator. It is quite essential to calculate employee costs for managing HR expenses.

How to Calculate Labor Costs?

Suppose that the gross working hours per week are 40 and pay rate is $10 per hour, and you are absent 10 days from work in a year. There are taxes of $1000, the insurance cost of $500, benefits of $2000, overtime cost of $500, and supplies expense of $500. If the total revenue is $80000 per year, then how is labor cost calculated? You use our efficient cost of labor calculator to find the labor cost of each employee.

Given:

Gross hours per week  = 40 hours

 Pay Rate = $10  per hour

Absent days per year  = 10 days

Taxes = $1000

Insurance  = $500

Benefits = $2000

Overtime = $500 

Supplies = $500

Total revenue = $80000

Solution:

Now calculating labor costs:

Gross Pay:

Let’s proceed with calculating the Gross pay.

 Gross hours per year = Gross hours per week *52

Gross hours per year = 40 *52

Gross hours per year = 2080  hours

 Gross pay = Gross hours per year * Pay Rate

Gross pay  = 2080 *10

 Gross pay = $ 20800

The total gross pay is $20800 employees per annum. You can calculate labor costs with the online free labour cost calculator by entering the per-hour rate of an employee.

Net Hours Worked:

Let’s proceed with calculating the Net hours worked.

Hours not worked per year  = Absent days per year * 8

 Hours not worked per year = 10 *8

Hours not worked per year  = 80 hours

 Net hours worked = Gross hours per year  – Hours not worked per year

Net hours worked  = 2080 – 80

Net hours worked = 2000  hours

The number of hours worked by the employee after deduction of the number of hours not worked per year. By doing this, you can calculate labor hours precisely and labor hour calculation becomes more realistic.

Being an employer, it is quite necessary to calculate labor costs and productivity. The labor cost calculations improve the productivity and performance of an organization.

Additional Annual Costs.

Let’s proceed with calculating the Additional annual costs.

Additional annual costs =  Taxes +  Insurance + Benefits  + Overtime +  Supplies

Additional annual costs = 1000 + 500 + 2000 + 500 + 500

Additional annual costs= $4500

You need to add the additional employees cost of adding the additional cost like the overtime and supplies cost. It is quite necessary to use the employee, true cost calculator to add the overhead when calculating labor costs with overheads.

Calculating the Labor Costs:

Let’s proceed with calculating the labor costs.

Annual Payroll Labor cost = Gross pay + Other annual costs

You need to find the gross pay plus the other annual cost to calculate the overall labor cost. The organization also bears the other annual cost and the total annual cost should be compared to the efficiency of an employee. 

 Annual Payroll Labor cost  = 20800 + 4500

Other annual costs = 25300 

 Hourly labor cost =  Annual Payroll Labor Cost /Net Hours Worked

Hourly labor cost =  25300/2000

Other annual costs = $12.65

It is necessary to calculate labor cost by adding the additional cost of the employees. The labour cost calculation is truly reflected by the labor cost calculator. 

Labor Cost Percentage Of Revenue:

Let’s proceed with calculating the Labor cost percentage.

Labor cost percentage = Annual Payroll Labor Cost /Total Revenue

Labor cost percentage = (25300 / 80000)*100

 Labor cost percentage = 0.31625 *100

Labor cost percentage = 31.6 %

The labor cost calculation has a direct relation with the revenues available. For calculating labor costs and revenue percentages, use the cost of labor calculator. This would make it possible to know precisely what percentage of the revenues are spent on labor.

Working of Labor Cost Calculator:

Let’s have a look at the simple working of an employee calculator in simple steps:

Input:

• Enter the gross working hours, per-hour pay rate, and absent days per year
• Enter the additional annual costs
• Enter total annual revenues
• Hit the calculate button

Output:

• Gross pay
• Net-hour worked per year 
• Additional annual costs
• Labor costs
• Labor cost percentage

FAQs

What Is the Unit Labor Cost?

Unit Labor cost (ULC) is the labor cost calculation for producing one unit of the output product. The material and labor cost calculator makes it possible to know both wages and benefits by calculating labor costs

What Is an Example of a Direct Labor Cost?

The direct labor cost calculation includes 

• The hourly salary rate of website programmers along with short and long-term benefits.
• The annual salary of a marketing manager who markets and advertises brand products. 

What Is 40% Profit?

The 40% profit margin means you have a net income of $0.40 for each dollar of sales. This is essential to calculating labor costs and revenue difference by the labor percentage calculator

Is 20% Profit Good?

A simple rule of thumb, 5% is a low margin, 10% is a healthy margin, and 20% is a high margin.

References:

From the source of Investopedia.com:Calculate labor cost, How to calculate labor cost?

From the source of learn.robinhood.com:Labor hour calculation, How to calculate labor hours?