Labour Cost Calculator
Labour Costs are the total amount of money that is being paid to employees in a set amount of time. They are split into two categories, direct costs and indirect costs.
Given that larger companies have many employees and a lot of factors are considered when calculating Labour Costs, these large companies use software and applications which are designed in order to calculate the Labour Costs specifically.
Use our calculator and modify the settings until you find they are useful to you, and let our calculator your Labour Costs. Note that if there are more staff in the Tier 1 group, then your average hourly Labour Costs will be higher, and vice versa.
What are Labour Costs?
Labour Costs are the total amount of money that is paid to employees in a set amount of time. These are split into two categories, direct costs and indirect costs.
- A Direct Cost relates to any production costs, service costs, or transformation process costs. The transformation process is when object or time is "transformed" into a product or service.
- An Indirect Cost relates to the costs which are required in order to supply the needs of the direct costs. Electricity bills, transportation costs, these are indirect costs.
It is typical for large companies to use software which is specifically designed in order to calculate the Labour Costs which are due.
The Labour Cost Formula
In order to effectively calculate your Labour Costs, you must be very methodical and review your assets on an individual basis. It is also incredibly helpful if you have a benchmark figure which is based on the period.
Human Resource Assets
- Categorise your employees on which pay rate they have. Some companies decide to categorise their employees based on their tax band and apply tolerance, although this will result in a less accurate calculation.
- Calculate the total number of employees that are in each tax band and produce the annual expenditure for each of these bands.
- Calculate the total amount of hours that have been worked across all employees.
- Add up the total from each group in order to find out your total Human Resource Asset expenditure. This is the figure that we will be using in the Labour Cost Calculator.