Payroll

Is there an ideal percentage of revenue that should go to payroll?

In my opinion, anyone who claims such a thing exists is full of it. Truth is, the figures vary widely among not only entire industries but also among the companies within them.

Some industries pay low wages but have high rates of employee turnover (fast food being the prime example). The low wages may be great for owners, but turnover usually results in high costs for acquiring and training replacements—expenses that need to be added to the total cost of payroll.

The age of your staff can make a difference, too. Having young workers may provide opportunities to limit your costs for medical insurance, life insurance and retirement plans, since many young people won’t avail themselves of these benefits even if offered. (This is no excuse to practice age discrimination. I bring this up to point out the sizable—and growing—costs associated with benefits beyond wages.)