Have you already reported your salary from 2022? The deadline in Switzerland is 31.01.2022.
If yes, maybe now, you have an idea about how much you paid yourself or your employees in 2022.
What impact it had on your business profit? You could do a simple calculation to see what the payroll-to-revenue ratio is for your business.
Payroll / Revenue
For example, you have 10 employees with 3.000CHF as salary per month. The total payroll cost per month is 30,000 CHF.
Your monthly revenue is 150.000 CHF.
In this case, your payroll revenue ratio is 30.000 / 150.000 = 0.2 (20%).
Now, you can calculate yours. What is your result?
This metric can be compared across industries and companies. But following this metric over time can also give your business insight into the productivity level per employee.
With this metric, you can answer questions like:
Do your salaries too high for the revenue you have?
Or can you afford to give everyone a pay rise this year?
Or can you afford to hire one more employee?
Business owners should have a ratio between 15 to 30 percent for their payroll expenses to be safe. But these percentages vary depending on the type and size of the business and the industry they are in.
Businesses that need a big number of employees to operate as theme parks, restaurants, and the like, spend about 20 percent to 40 percent on their employees’ salaries. In comparison, a company that uses automation may only cost an average of 10 percent for their employees’ salaries.
On the other hand, retail businesses pay around 10 percent to 20 percent of revenue for labor. Like those that need to produce some products, service-based businesses usually have salary costs that can go up to as high as 50 percent.
Understanding why a business should control its payroll expenses is fundamental because going above 30 percent of its gross revenue can bring them down.
We are here to help!