Labor Cost as a Percentage of Revenue by Industry
When payroll grows faster than revenue, the problem is rarely the people. It is usually what the people spend their time on.
Labor cost percentage of revenue is your total labor cost divided by your revenue. It is one of the clearest signals of whether the business is getting more expensive to run. The tables below show payroll as a share of revenue by industry and company size, from the U.S. Census Bureau's Statistics of U.S. Businesses for 2022, the most recent year with revenue data.
One important detail first: Census "annual payroll" covers wages, salaries, commissions, bonuses, vacation and sick pay, and employee contributions to pension plans. It does not list employer-paid benefits or employer payroll taxes, so your full labor cost is higher than these figures. For private industry, the Bureau of Labor Statistics estimates benefits at 30.0% of total employer compensation costs, with wages and salaries at 70.0% (BLS, Employer Costs for Employee Compensation, June 2026, released September 9, 2026).
Payroll as a percentage of revenue by sector and company size
U.S., 2022. Company size is the total number of employees across the whole company.
| Sector | 10-19 employees | 20-49 employees | 50-99 employees | 100-499 employees | All firms |
|---|---|---|---|---|---|
| All industries | 20.7% | 20.7% | 19.6% | 19.4% | 17.6% |
| Construction | 19.7% | 19.5% | 19.1% | 18.6% | 18.3% |
| Manufacturing | 22.1% | 20.7% | 18.2% | 15.8% | 12.0% |
| Wholesale trade | 6.8% | 6.7% | 6.5% | 6.0% | 4.6% |
| Retail trade | 11.0% | 10.2% | 9.4% | 9.2% | 8.5% |
| Transportation and warehousing | 20.0% | 23.1% | 26.0% | 24.2% | 25.5% |
| Information | 30.2% | 30.8% | 30.3% | 32.8% | 24.1% |
| Finance and insurance | 30.3% | 28.7% | 26.0% | 22.5% | 14.7% |
| Real estate and rental | 19.5% | 20.9% | 22.0% | 18.6%* | 17.4% |
| Professional, scientific and technical services | 36.2% | 38.6% | 39.6% | 39.8% | 39.3% |
| Administrative and support services | 32.1% | 36.0% | 39.1% | 41.7% | 55.2% |
| Educational services | 35.9% | 40.9% | 42.2% | 40.1% | 33.3% |
| Health care and social assistance | 39.1% | 41.5% | 42.3% | 42.0% | 38.4% |
| Arts, entertainment and recreation | 27.5% | 31.7% | 32.3% | 37.9% | 31.7% |
| Accommodation and food services | 29.7% | 34.5% | 35.3% | 30.3% | 29.4% |
| Other services | 26.3% | 26.8% | 23.4% | 19.9%* | 24.5% |
Payroll as a percentage of revenue by type of business
| Type of business | Under 20 employees | 20-99 employees | 100-499 employees | All firms |
|---|---|---|---|---|
| Beauty salons | 40.3% | 53.1% | 48.7% | 44.5% |
| CPA offices | 39.2% | 48.5% | 46.0% | 37.1% |
| Dental offices | 35.9% | 39.2% | 41.1% | 37.2% |
| Employment placement agencies | 35.6% | 42.4% | 52.3% | 51.5% |
| Engineering services | 35.1% | 39.8% | 40.1% | 40.6% |
| Freight transportation arrangement | 12.0% | 16.4% | 19.1% | 18.8% |
| General automotive repair | 25.6% | 26.9% | 26.3% | 26.8% |
| Insurance agencies and brokerages | 32.2% | 36.2% | 32.7% | 32.8% |
| Law offices | 34.0% | 43.3% | 42.5% | 36.7% |
| Long-distance trucking (truckload) | 13.0% | 19.3% | 20.8% | 20.4% |
| Marketing consulting services | 24.0% | 31.4% | 30.1% | 29.1% |
| Other health practitioner offices | 31.5%* | 43.9% | 46.6%* | 35.8% |
| Other personal care services | 31.2% | 45.8% | 35.5% | 35.9% |
| Physician offices | 35.7% | 43.0% | 42.7% | 41.8% |
| Plumbing, heating and AC contractors | 26.0% | 27.0% | 27.3% | 26.8% |
| Residential property managers | 25.7% | 41.5% | 41.8% | 37.6% |
| Residential remodelers | 17.0% | 19.5% | 19.1% | 17.9% |
| Temporary staffing services | 31.1%* | 50.1% | 57.9% | 54.3% |
| Wholesale, durable goods | 8.7% | 9.6% | 8.0% | 6.7% |
| Wholesale, nondurable goods | 5.3% | 4.9% | 4.3% | 3.2% |
* The Census Bureau applied medium or high statistical noise to this cell to protect confidentiality. Treat it as less precise.
How to calculate your labor cost percentage
| Step | What to use |
|---|---|
| Payroll | Wages, salaries, commissions and bonuses paid in the year |
| Full labor cost | Payroll plus employer payroll taxes and benefits (health, retirement, paid leave) |
| Revenue | Revenue for the same year, net of sales taxes |
| Payroll percentage | Payroll ÷ revenue × 100, to compare with the tables above |
| Full labor cost percentage | Full labor cost ÷ revenue × 100, for your own planning |
Use payroll only when comparing with the tables, because that is what the Census figures measure.
What a high labor cost percentage usually means
A labor cost percentage above your industry is not automatically a problem. It can reflect higher pay to keep good people, a more service-heavy offer or deliberate investment ahead of growth. It becomes a problem when the extra cost does not show up as extra revenue. Common causes:
- Repetitive work inside skilled roles. Expensive people spend hours on data entry, scheduling, reminders and status updates.
- Rework. Errors that someone has to fix after the fact.
- Coordination overhead. Meetings and messages that exist because nobody can see where work stands.
- Slow conversion of demand. Leads and quotes that go unanswered, so the team is paid but revenue does not follow.
What to do about it
- Measure where the hours go in your three biggest processes. Our guide on the cost of manual processes has a worksheet.
- Move repetitive work to systems, so your people spend their time on customers and decisions. See how to reduce overhead costs.
- Fix revenue leaks before cutting: faster response and consistent follow-up raise revenue with the same team. See speed to lead.
- Hire for strategic roles and give them systems that remove the routine. See hiring vs outsourcing.
To see the same data from the revenue side, use our revenue per employee benchmark and compare your own numbers.
Source and method
U.S. Census Bureau, Statistics of U.S. Businesses (SUSB), 2022, tables "us_state_naics_detailedsizes_2022" and "us_state_6digitnaics_2022", United States totals, released April 10, 2025. Payroll percentage = annual payroll ÷ receipts × 100, rounded to one decimal. SUSB covers employer businesses only. An owner who does not take a formal payroll salary is not counted, which lowers the payroll percentage of some small firms. Benefits share: BLS Employer Costs for Employee Compensation, private industry, June 2026. Calculated by Rulehedge Growth on October 31, 2026.
Frequently asked questions
What is a good labor cost percentage of revenue?
It depends heavily on the industry. In 2022 U.S. payroll averaged about 17.6% of revenue across all industries, but under 7% in wholesale trade and close to 40% in professional services and in health care. Compare against your own industry and size, and remember full labor cost includes benefits and payroll taxes on top of payroll.
How do you calculate labor cost as a percentage of revenue?
Divide your labor cost for the year by your revenue for the same year and multiply by 100. To compare with Census tables, use payroll only; for planning, add employer payroll taxes and benefits.
Does labor cost include benefits and payroll taxes?
Full labor cost does. The Census payroll figures in these tables list wages, salaries, bonuses, paid leave and employee pension contributions, but not employer-paid benefits or payroll taxes, so full labor cost is higher.
How can a business lower its labor cost percentage without layoffs?
Remove repetitive work from skilled roles, reduce rework, cut coordination overhead and convert more of the demand you already have, so revenue grows faster than payroll.
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