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# Labour Cost Calculator

Labour costs are the sum of monies paid to employees during a specific period, year, quarter, month or week. Labour costs are split into direct costs and indirect costs.

Due to number of employees and associated factors within and related to the transformation process, large companies use dedicated software and applications to calculate Labour costs.

Salary TierAnnual SalaryHours Worked Per WeekNumber of Employees in Tier
Tier 1
Tier 2
Tier 3
Tier 4
Tier 5
Tier 6
Annual Labour Cost7520000.00
Quarterly Labour Cost1,880,000.00
Monthly Labour Cost626,666.67
Weekly Labour Cost144,615.38
Average Cost per Employee
Daily Labour Cost87.75
Hourly Labour Cost11.70
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Use the calculator above to modify settings for your company and produce a bespoke Labour coast calculation. Note that the more staff in Tier 1, the higher your avearge hourly Labour Cost and vice versa.

## What is Labour Cost?

Labour costs are the sum of monies paid to employees during a specific period, year, quarter, month or week. Labour costs are typically split into direct costs and indirect costs.

• Direct Costs: Directly related to the production, service , transformation process (the process of turning an object/time into products/service).
• Indirect Costs: Required to facilitate the direct costs. For example fuel bills, infrastructure, transportation etc.

Large companies typically use dedicated software and applications to calculate Labour costs due to number of employees and associated factors within and related to the transformation process.

## How to calculate Labour Cost | Labour Cost Formula

The key to effectively calculating labour costs is to be methodical and review specific assets individually. You should also have a benchmark figure based on the period whether daily, monthly or as in the Labour Cost Calculator above, annually.

Human Resource Assets

1. Split your employees by pay rate (some companies split by band and apply tolerance but this will result in a less accurate figure, ideally we want to be specific at all times to ensure an accurate figure).
2. Total up how many employees you have in each band and produce the total annual expenditure for each group.
3. Calculate the total number of hours worked across the workforce.
4. Add the sum of all groups to define your total Human Resource Asset expenditure, this is the figure we will use in the calculator above. The figures gathered above should provide meat to underpin your report and methodology used in producing the Labour Cost calculation.

### Example Labour Cost Calculation

Salary TierSalaryNo of EmployeesTotal HoursHourly RateTier Cost
Tier 1£100,00.00137.5£51.28£100,00.00
Tier 2£75,00.003112.5£38.46£225,000.00
Tier 3£50,00.00301125£25.64£1500,000.00
Tier 4£20,00.0030011250£10.26£6,000,000.00
TotalsSalary33412525Hourly Rate£7,825,000.00

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