The Payroll vs. Profit Percentage of Revenue Spent on Payroll Calculation is one to keep at your fingertips.
As of May 2022, the benchmark for Roofing companies with gross revenues between $1M to $5M are 12%.
Payroll and outsourced labor are a major cost to maintain control of to keep your net profit above the breakeven point.
The metric is calculated by taking the total of salaries & wages plus employee-related expenses, dividing that total by revenue, and expresses it as a percentage. This metric helps you estimate how much of your company’s gross income to spend on payroll. For this metric, payroll includes salaries and wages for on-staff and contract employees plus employee-related expenses (benefits, taxes, etc.).
Spending too much of your revenue on personnel can result in your business being unprofitable. On the other hand, spending too little can make it difficult to attract and keep good employees. We know all about this yo-yo, don’t we? This metric can also tell you something about your company’s efficiency. If two similar companies generate the same revenue, but one does it with 30% fewer people, the more efficient company will clearly be more profitable. More than one way exists to achieve the goal or need you are looking for. Think outside the box with an open mind and discover new ways to add profits to the bottom line without adding staff or losing revenue.