# What is my labor cost?

Works out the labor cost of a job or pay period from workers, hours and the hourly wage plus a labor burden for payroll taxes and benefits, the cost per hour, and labor cost as a percent of sales.

- Page: https://www.acalculator.org/finance/labor-cost-calculator
- JSON spec: https://www.acalculator.org/finance/labor-cost-calculator.json
- Version: fd3fc765b341

## Default answer

Example with the default inputs (Number of workers 5, Hours each 40, Hourly wage $18.00, Labor burden 25%, Sales for the period $15,000.00): 5 workers for 40 hours each at $18.00 an hour cost $4,500.00 in labor, or $22.50 per hour worked.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| workers | Number of workers | How many people work the hours below, each at the same wage. |
| hours | Hours each | Hours each worker is paid for in the period (a shift, a week, a job). |
| wage | Hourly wage | The pay for one hour, before tax. |
| burden | Labor burden | Payroll taxes, insurance, paid leave and other benefits, as a percent of wages: 7.65% covers Social Security and Medicare alone. Optional. |
| sales | Sales for the period | Revenue for the same period, for the labor cost percentage. Optional. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| total | Total labor cost | Wages + labor burden. |
| wages | Wages | Workers × hours each × hourly wage. |
| extra | Labor burden | Wages × labor burden ÷ 100. |
| perHour | Cost per hour worked | Total labor cost ÷ (workers × hours each): the hourly wage plus its burden. |
| percent | Labor cost percentage | Total labor cost ÷ sales × 100. Shown when sales of more than $0 are typed. |

## Method

Wages = workers × hours each × hourly wage. Labor burden = wages × burden ÷ 100. Total labor cost = wages + labor burden. Cost per hour worked = total ÷ (workers × hours each). Labor cost percentage = total ÷ sales × 100.

## Assumptions

- Every worker is paid the same wage for the same hours; overtime and a second wage go in a second run.
- The labor burden is one percent of wages for payroll taxes, insurance, paid leave and other benefits, as typed.
- Arithmetic is exact on the typed decimals; money shows to the cent and the percentage to 2 decimals, halves rounded up.

## Worked examples

1. workers = 5, hours = 40, wage = $18.00, burden = 25%, sales = $15,000.00 gives wages = $3,600.00, extra = $900.00, total = $4,500.00, perHour = $22.50, percent = 30%.
2. workers = 1, hours = 8, wage = $7.25, burden = 7.65% gives wages = $58.00, extra = $4.44, total = $62.44, perHour = $7.80. Source: Beth Egan, Penn State, Introduction to Food Production and Service, Lesson 4.2, Managing Labor Costs (labor cost percentage = labor dollars ÷ sales × 100; employer taxes of 7.65% on an $58 day), https://workforce.libretexts.org/Bookshelves/Food_Production_Service_and_Culinary_Arts/Introduction_to_Food_Production_and_Service_(Egan)/04:_Managing_and_Controlling_Operating_Expenses/4.02:_Managing_Labor_Costs: 8 hours × $7.25 = $58.00.
3. workers = 1, hours = 1, wage = $437.30, burden = 0%, sales = $1,500.25 gives total = $437.30, percent = 29.148475%. Source: Beth Egan, Penn State, Introduction to Food Production and Service, Lesson 4.2, Managing Labor Costs (labor cost percentage = labor dollars ÷ sales × 100; employer taxes of 7.65% on an $58 day), https://workforce.libretexts.org/Bookshelves/Food_Production_Service_and_Culinary_Arts/Introduction_to_Food_Production_and_Service_(Egan)/04:_Managing_and_Controlling_Operating_Expenses/4.02:_Managing_Labor_Costs: $437.30 ÷ $1,500.25 × 100 = 29.1%.

## FAQ

### How do I calculate labor cost?

Multiply workers × hours × hourly wage for the wages, then add the labor burden: payroll taxes, insurance, paid leave and other benefits. 5 workers × 40 hours × $18 = $3,600 of wages; a 25% burden adds $900, so the labor cost is $4,500.

### What is the labor burden?

The costs an employer pays on top of wages, as a percent of wages. Social Security and Medicare alone are 7.65% of wages for the employer; unemployment insurance, workers’ compensation, health insurance, retirement contributions and paid leave add more. In June 2026, private employers spent $14.07 an hour on benefits on top of $32.82 of wages, about 43%.

### How do I calculate the labor cost percentage?

Divide the labor cost by sales for the same period and multiply by 100. Labor of $437.30 against $1,500.25 of sales is 29.15%. Restaurants and food services watch it to keep labor in line with sales.

### What is the cost per hour worked?

The total labor cost divided by the hours worked: the hourly wage plus its share of the burden. An $18 wage with a 25% burden costs $22.50 an hour.

### How do I include overtime?

Run the calculator twice: once for regular hours at the regular wage, once for overtime hours at the overtime rate (usually 1.5 times the wage), and add the two totals.

### Is the labor cost the same as an employee’s total compensation?

For one worker over a year, it is close: wages plus the benefits and payroll taxes the employer pays. The total compensation calculator breaks those parts out one by one.

## Sources

- Beth Egan, Penn State, Introduction to Food Production and Service (CC BY 4.0), Lesson 4.2, Managing Labor Costs: labor costs include wages and salaries, overtime and fringe benefits; labor cost percentage = labor dollars ÷ sales × 100 ($437.30 ÷ $1,500.25 × 100 = 29.1%); a part-time employee’s day of 8 hours at $7.25 ($58.00) with 7.65% employer taxes ($4.44). https://workforce.libretexts.org/Bookshelves/Food_Production_Service_and_Culinary_Arts/Introduction_to_Food_Production_and_Service_(Egan)/04:_Managing_and_Controlling_Operating_Expenses/4.02:_Managing_Labor_Costs (retrieved 2026-10-19)
- U.S. Bureau of Labor Statistics, Employer Costs for Employee Compensation, June 2026: private industry $46.89 an hour in total, $32.82 wages and salaries, $14.07 benefits. https://www.bls.gov/news.release/ecec.nr0.htm (retrieved 2026-10-19)
- Internal Revenue Service, Topic No. 751, Social Security and Medicare withholding rates: the employer pays 6.2% Social Security tax and 1.45% Medicare tax. https://www.irs.gov/taxtopics/tc751 (retrieved 2026-10-19)