Payroll Percentage Calculator
Written by the percentages.co.uk team. Reviewed for accuracy.
This calculator works out your payroll as a percentage of revenue. It includes UK industry benchmarks so you can see how your business compares, plus a reverse calculation to find the maximum payroll budget that keeps you within a target percentage.
Payroll as % of revenue
Reverse: maximum payroll budget
How it works
Payroll percentage of revenue is a key financial metric for any business with employees. It tells you what share of each pound of revenue is consumed by staff costs. Include all employment costs: gross salaries, employer National Insurance contributions (currently 13.8% above the secondary threshold), employer pension contributions and any other remuneration.
The formula
Payroll % = (Total payroll cost / Total revenue) × 100
Max payroll budget = Revenue × (Target % / 100)
UK industry benchmarks
- Retail: 10-15% of revenue
- Hospitality and restaurants: 25-35% of revenue
- Professional services (consulting, law, accounting): 40-60% of revenue
- Manufacturing: 15-25% of revenue
- Software and technology: 35-50% of revenue
Worked examples
A restaurant turns over £480,000 in a year and spends £158,400 on all staff costs. What is the payroll percentage?
- Payroll %: (158,400 / 480,000) × 100 = 33%
- This sits within the 25-35% benchmark for hospitality
Answer: 33% payroll-to-revenue ratio
A digital agency has revenue of £1.2m and wants to keep payroll below 55%. What is the maximum payroll budget?
- Max payroll: 1,200,000 × (55 / 100) = £660,000
Answer: Maximum payroll budget is £660,000
A retail chain has monthly revenue of £85,000 and pays £10,200 in wages. What is the payroll percentage?
- Payroll %: (10,200 / 85,000) × 100 = 12%
- This is within the 10-15% benchmark for retail
Answer: 12% payroll-to-revenue ratio
A law firm earns £2.8m and spends £1.54m on staff including employer NI and pension. What is the payroll percentage?
- Payroll %: (1,540,000 / 2,800,000) × 100 = 55%
- This is within the 40-60% professional services range
Answer: 55% payroll percentage
A start-up has revenue of £300,000 and payroll costs of £210,000. Is this within a typical tech benchmark?
- Payroll %: (210,000 / 300,000) × 100 = 70%
- Above the 35-50% tech benchmark, which may be expected at early stage
Answer: 70% (above benchmark for tech)
When to use this
- Monthly management accounts: Tracking whether wage costs are creeping up as a share of revenue, which can signal a profitability problem before it reaches the P&L bottom line.
- Headcount planning: Before hiring, calculating what the total employer cost of a new role represents as a percentage of forecast revenue to ensure it is sustainable.
- Business valuation: Buyers and investors use payroll percentage to assess operational efficiency, particularly in labour-intensive sectors.
- Salary review budgeting: Setting a payroll percentage target to work backwards to the maximum total salary uplift affordable given expected revenue.
Understanding the result
A rising payroll percentage may mean costs are growing faster than revenue, or that the business has taken on additional headcount ahead of revenue growth. Neither is inherently bad, but both deserve attention.
Always include employer National Insurance and pension contributions in your payroll figure. The employer NI rate on earnings above the secondary threshold is currently 13.8%. Pension auto-enrolment adds a minimum of 3% employer contribution. Excluding these understates your true payroll cost significantly.
Related concepts
➡ For tracking how one employee's cost compares to their direct contribution, use the percentage to quota calculator to see attainment against individual revenue targets. ➡ To find what percentage of revenue any other cost category represents (rent, materials, marketing), the percentage of a number calculator works the same way for any two figures. ➡ To track how payroll percentage has moved year-on-year, use the percentage change calculator to measure the shift between periods.
How to do this in Excel
=(A1/B1)*100
Put payroll cost in A1 and revenue in B1. For max budget at a target percentage: =B1*(C1/100) where C1 contains the target percentage.
How to do this without a calculator
Divide your total payroll cost by your revenue and multiply by 100. For a quick sense check: if payroll is roughly a quarter of revenue, that is about 25%. Half of revenue is 50%. Round the numbers to make mental arithmetic easier.
Common mistakes
Omitting employer NI and pension from the payroll figure
Using gross salaries only understates the true cost. A £30,000 salary costs the employer roughly £34,140 once employer NI and minimum pension are included.
Using net revenue or gross profit instead of total revenue
Benchmarks for payroll percentage are typically expressed as a proportion of total (gross) revenue before any deductions. Using gross profit or net revenue makes your figure look higher and incomparable to benchmarks.
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