How it’s calculated
Employee Wages as a percentage of Total Income is calculated as:
(Employee Wages & Salaries / Total Income) * 100
Note: Employee wages does not include superannuation, owner’s wages or owner’s superannuation.
How It’s Used
When benchmarking expense items, such as employee wages, treating them as a percentage of total income makes it possible to draw comparisons against other companies.
If for example the company’s wages as percentage of income figure is below the norm, it may indicate you have too many employees, or that employees are not performing to their full capacity. If on the other hand the percentage is above the norm, this may suggest staff are performing at optimal levels. It is always worth checking against other productivity metrics, such as revenue per number of employees, which are included in the benchmarking.com.au online tool.
Excluding owner’s wages also filters out a noise from the benchmark data and makes for more accurate and relevant comparisons. The owner’s component can vary depending on how much the owner chooses to pay themselves as a salary, how much they pay themselves as superannuation, and how many unpaid hours they commit to the business. It is particularly important to remove this input for Small Medium Enterprises (SME’s) where owner’s wages form the majority of the wage component.
For information on the Revenue per Employee productivity benchmark please click here.