Payroll to Revenue Ratio

[Andy L88]

I have two related queries:

1. What's the most accurate way of working out Payroll to Revenue Ratio? Would Payroll just be the sum total of salaries before any deductions? And then revenue being the turnover for the year?

2. What would be the ideal ratio for a electronics business? We sell electronics products through a shop front as well as distribution to the trade on a wholesale basis.

Thanks in advance.

 

[SteveHa]

I can answer 1. and that is, no.

You also need to consider employer's NI, employer's pension contributions (if there are none yet, check that you don't have an imminent auto-enrolment staging date. If a new payroll, then you may have an immediate obligation). The costs of any benefits in kind (e.g. private medical insurance paid on behalf of employees etc.)

Payroll costs are more than just the cost of the salaries.

 

[DontAsk]

What's so important about payroll to revenue? What about all your other costs?

Ideal is surely as low as possible.

 

[Andy L88]

Thanks SteLacca.

DontAsk - Of course all the other costs are important. Similarly, of course the goal is as low as possible. I just wanted an industry average to measure against. For example service-based businesses would have a higher ratio than product-based but just wanted to know figures.