Results 1 to 5 of 5

Thread: Formula to calculate staff costs against profit

  1. #1
    Junior Member
    Join Date
    Jan 2014
    Location
    Mpumalanga
    Posts
    19
    Thanks
    1
    Thanked 0 Times in 0 Posts

    Formula to calculate staff costs against profit

    Good Afternoon,

    A client recently asked me if I knew the formula to calculate how much turnover can be allocated to staff costs (salary, UIF etc) to still make a profit and what the percentage of these costs are?

    I hope this makes sense since it's a bit of hard question to explain. Help would be much appreciated :-)

  2. #2
    Platinum Member
    Join Date
    Oct 2008
    Location
    SA
    Posts
    1,520
    Thanks
    207
    Thanked 84 Times in 80 Posts
    This is an even harder question to answer. Staff costs depend on many factors and is not as simple as allocating a percentage to it. You may do calculations to work out what would be your ideal % that you would like to target to maximise your profits vs. quality vs. service, etc...

    In essence the costs are largely dependant on the industry you operate in. Some are more labour intensive than others and therefore use more staff than others. Some use highly skilled staff that cost more while others dont. Your business maybe a high turnover low profit margin business vs. a low turnover high profit margin business and the list goes on.

    My advice would be to determine the best % for your individual business and work towards achieving that while not compromising on other aspects! (especially if this is a small business)

    Hope this helps

  3. #3
    Suspended
    Join Date
    Mar 2013
    Location
    Had enough
    Posts
    3,358
    Thanks
    114
    Thanked 213 Times in 201 Posts
    Companies nowadays work on a Cost to Company - this includes everything that the staff member would cost them. If you have this figure and your turnover you can get a percentage very easily.

  4. #4
    Diamond Member Justloadit's Avatar
    Join Date
    Nov 2010
    Location
    Johannesburg
    Posts
    3,480
    Thanks
    134
    Thanked 695 Times in 593 Posts
    Blog Entries
    1
    I use staff cost as another product cost in my business. This makes it easier to identify when doing my costing breakdown. Every industry has its very own costing model, and you have work out what fits in your industry. Once you have these numbers, then it is much easier to work out where you highest expenses are, and gives you an idea of how to control the expenses. Sometime an extra employee may be required who is a foreman to co-ordinate the employees to work as a team and become more efficient, but this is always industry related.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar pumping, Solar Geyser & Solar Security lighting solutions - www.microsolve.co.za

  5. #5
    Diamond Member wynn's Avatar
    Join Date
    Oct 2006
    Location
    east london
    Posts
    3,338
    Thanks
    548
    Thanked 625 Times in 524 Posts
    Usually salaries/wages etc are a fixed cost except where overtime is added so you should calculate it the same as rent, insurance and other fixed monthly outputs.
    Calculating a fixed cost against a variable such as sales or production is nigh impossible so I would say add all your fixed costs into a basket and after you exceed that figure with profit on turnover during a month/period the rest is money in the bank and at the end of the month/period you can calculate it as a % but guaranteed it will vary from month to month/period.
    "Nobody who has succeeded has not failed along the way"
    Arianna Huffington

    Read the first 10% of my books "Didymus" and "The BEAST of BIKO BRIDGE" for free
    You can also read and download 100% free my short stories "A Real Surprise" and "Pieces of Eight" at
    http://www.smashwords.com/books/view/332256

Similar Threads

  1. VAT apportionment formula
    By alanc in forum Tax Forum
    Replies: 2
    Last Post: 05-Dec-12, 03:37 PM
  2. the get rich quick formula
    By murdock in forum General Business Forum
    Replies: 3
    Last Post: 14-Apr-10, 07:32 AM
  3. formula for adding amp values
    By foxfire in forum Electrical Contracting Industry Forum
    Replies: 0
    Last Post: 29-Jun-09, 04:38 PM
  4. Formula 1 2008 - How close was that!
    By Dave A in forum General Chat Forum
    Replies: 3
    Last Post: 04-Nov-08, 10:12 PM

Did you like this article? Share it with your favourite social network.

Did you like this article? Share it with your favourite social network.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •