How do you calculate labor cost accurately? For many businesses, figuring out labor costs is a challenge. These costs can add up even more in industries where cash management takes up valuable time. With our labor cost calculator, identify the impact of labor on day-to-day overhead and clarify exactly how much cash handling costs to uncover ways to optimize your operations.

Determining labor costs is a crucial part of running a profitable business. Knowing these numbers helps you plan, budget, and allocate resources effectively to support business growth. Our employee cost calculator makes it simple to estimate employee costs, whether you’re managing a single location or overseeing an entire franchise business.

Why Accurate Labor Cost Calculations Matter

Accurately calculating labor costs is essential for budgeting, forecasting, and maintaining healthy profit margins. Labor costs are usually the biggest expense for a business. This includes wages, taxes, benefits, and other employee-related costs. Using a total cost of employee calculator can provide clarity on these expenses, ensuring you’re making data-driven decisions.

Particularly for cash-heavy industries like retail, restaurants, and convenience stores, labor costs fluctuate with seasonal demand, staffing needs, and cash handling requirements. Knowing how to calculate what an employee costs is an important step to empowering business decision making. When businesses understand how to figure out labor costs, they’re better equipped to manage these challenges, maintain cash flow, and stay competitive.

ICL’s software-first CashSimple® solution streamlines everything from change orders to tracking deposits.

Breaking Down Employee Labor Costs

Understanding the components of employee labor costs is essential to managing expenses effectively. The main factors are wages, hours worked, taxes, and benefits which all work together to determine the total cost of an employee. Wages and hours represent the most visible expenses, but taxes (such as payroll taxes) and benefits (like health insurance and retirement contributions) often make up a significant portion of overall costs. Including all of these expenses ensures a more accurate picture of how much labor truly costs your business.

When you look closely at cash handling costs, you may find that many tasks take more time than you expect each week. Some tasks can reveal hidden issues. These tasks include balancing cash drawers, preparing deposits, and working with vendors, such as armored transport services. It’s important to pay attention to these details to avoid missing problems.

Knowing the cost of labor can lead to extensive improvements to keep business running smoothly. For instance, excessive overtime hours could indicate the need for additional staffing while excessive cash handling labor costs might highlight the need to outsource cash management. Using these insights, you can make strategic adjustments to reallocate resources, invest in automation with a solution like CashSimple®, or refine scheduling practices. An accurate calculation not only highlights current expenses but also helps you identify opportunities to optimize labor management for long-term success.

From retail to restaurants and banking, CashSimple® is the right solution for any industry.

Simplify Your Cash Handling Labor Costs Today with CashSimple®

Using our labor calculator can help manage costs, especially for cash handling which can be time consuming and expensive. Tasks like balancing cash drawers, preparing deposits, and organizing cash transport are important. However, they are often ignored in regular cost analyses.

If cash handling tasks take too much time or stress your resources, CashSimple® from Integrated Cash Logistics can help. CashSimple® helps businesses manage third-party vendors and reduce delays with provisional credit by offering real-time cash visibility. This makes it easier to control cash in one location or across franchises. As a result, businesses can focus their labor on more valuable tasks.

Better understand how much labor costs your business for everyday tasks to take control of your operations. Schedule a demo to see how CashSimple® can help save time, reduce friction between vendors, and shorten the distance to cash across your organization.

Labor Cost Frequently Asked Questions

What are labor costs, and why are they important for my business?

Labor costs include wages, payroll taxes, and benefits that employers pay to employees. Understanding labor costs is crucial for managing budgets, improving profitability, and ensuring operational efficiency across industries.

How can I calculate my total labor costs?

To calculate labor cost, multiply wages by hours worked for each employee, adding in additional expenses such as taxes and benefits. Then multiply that cost by the timeframe relevant to your concerns: daily, monthly, or annually. Using a total cost of employee calculator like above simplifies this process, giving you a clear breakdown of expenses.

What percentage of revenue should my business spend on labor?

Labor cost percentages vary by industry. For example, according to the Bureau of Labor Statistics, retail businesses typically spend 15-25% of revenue on labor, while restaurants often allocate 25-35%. However, this can increase to nearly 50% depending on the nature of the business. Tracking these percentages helps maintain healthy profit margins.

How do taxes and benefits impact overall labor costs?

Taxes (e.g., payroll taxes) and benefits (e.g., health insurance) significantly increase the cost of labor. According to the Bureau of Labor Statistics, taxes and benefits account for approximately 22.6% of the total wage cost in retail industries, while the restaurant industry accounts for 23.9% of total wage cost.

What are the hidden costs of manual cash handling?

Manual cash handling includes tasks that take a lot of time. These tasks are counting cash, preparing deposits, and ordering coins. It also involves managing armored cash transport and making bank runs. These hidden costs can accumulate quickly, reducing profitability and wasting valuable employee time.

Why should I track cash handling labor costs separately?

Tracking cash handling labor costs separately identifies inefficiencies and opportunities for savings which can be especially impactful for cash-heavy businesses. Tools like CashSimple® can streamline efficiencies for cash management and reduce the time spent on cash handling activities which reduces overall labor costs.

What are direct and indirect labor costs?

Direct labor costs are wages for employees directly involved in delivering goods or services. This can be physically making products that are being sold, or working with customers to sell the products.

Indirect labor costs include roles that support direct labor like administrative, quality control or maintenance staff. These roles contribute to the overall business success in other ways that don’t necessarily work directly with consumers. Tracking both provides a comprehensive view of your labor expenses.

How do labor costs vary across industries?

Labor costs differ by industry due to unique operational needs. Retail, restaurants, and convenience stores often have distinct cost structures because they work closely with customers and handle cash frequently. Benchmarking labor costs in these industries is important because of the highly competitive nature of each industry.

How can automation reduce labor costs?

Automation reduces repetitive tasks like going to banks, manually investigating reports, or spending time creating change orders which ultimately supports saving time and minimizing errors. This allows businesses to reallocate labor to higher-value tasks like supporting business growth, and optimize overall costs.

How does employee turnover affect labor costs?

High turnover rates increase costs significantly for recruitment, training, and lost productivity. It can also impact costs by requiring team members to work overtime which is more costly than an average waged employee. Retaining employees through better management and incentives helps minimize these expenses.

What’s the ROI of managing labor costs effectively?

Efficient labor cost management can grow profits by reducing unnecessary expenses and optimizing resources. Regularly using a labor cost calculator to verify employee costs can create a healthy check and balance of business needs.

Sources:

May 2023 National Occupational Employment and Wage Estimates. U.S. Bureau of Labor Statistics. (2024, April 4). https://www.bls.gov/oes/2023/may/oes_nat.htm#35-0000

Retail assistant store manager salary: Hourly Rate (USA). Zip Recruiter. (2025a, January 6). https://www.ziprecruiter.com/Salaries/Retail-Assistant-Store-Manager-Salary

Salary: Fast Food Restaurant manager (jan, 2025) US. Zip Recruiter. (2025b, January 6). https://www.ziprecruiter.com/Salaries/Fast-Food-Restaurant-Manager-Salary