EMPLOYEE COSTS AS A % OF TURNOVER

Question 1

What is EMPLOYEE COSTS AS A % OF TURNOVER

Answer 1

The percentage of an organisations sales revenue that is spent on the remuneration (remuneration = money paid for work or a service.) of staff

Question 2

Whats the formula for working out EMPLOYEE COSTS AS A % OF TURNOVER

Answer 2

Formula = Employee costs divided by sales revenue multiplied by 100

Question 3

What is EMPLOYEE COSTS AS A % OF TURNOVER used for

Answer 3

An indication of how capital or labour intensive a business is (If its more labour intensive, then the business owners are probably looking to automate some of their process)

Benchmarks for performance depend on the industry (some businesses are more labour intensive than others. For example: A high end tailor will most likely have its products handmade, which will make it more labour intensive than a a car factory, as the car factory is extremely automated

A high or rising figure may indicate that labour productivity is falling - For example: you look at the trend if employee costs as a percentage of turnover, that could be an indication that labour productivity is falling which means that workers aren’t making as much as they used to, which means the business is spending a higher proportion of its revenue on paying staff

A low or falling figure may indicate that staffing levels are too low, and customer service may suffer - the business probably needs to employ more staff