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Free tools for HR leaders

Labour cost
calculator (Australia)

See labour as a share of revenue and work out what overtime is really adding to the bill.

Your numbers

Set to match your award or agreement
Labour cost share
 
Share
What is a good labour cost percentage?

It varies widely by sector. Service and hospitality businesses often run high, while capital-heavy industries run lower. The useful comparison is against your own trend and against businesses in your industry, rather than a single benchmark.

How we calculated this

Labour cost percentage is your total annual labour cost divided by revenue, multiplied by 100. Overtime cost is the overtime hours you entered multiplied by the average hourly rate and the penalty multiplier, and we show that as a share of total labour so you can see how much of the wage bill is premium time. Nothing here is a benchmark: labour share varies too much by industry for a single target, so the number is yours to track against your own history and your sector. The working, the assumptions and the sources are below.

New to the term? Read the plain-English definition of penalty rates in the HR Glossary.

Your working
Assumptions
  • Labour cost is whatever you entered. For an honest percentage it should already include overtime and every on-cost, from super to payroll tax, rather than base wages alone. Enter base only and the share understates.
  • One penalty multiplier covers all overtime. Real awards vary the rate by day, by time of day, by hours already worked and by classification (time and a half for the first hours and double time after, for example), so the overtime figure is an average, and usually a low one.
  • Overtime is priced at the average hourly rate across the business. If overtime is concentrated in higher-paid roles, the true cost is higher; if it sits in lower-paid roles, lower.
  • Revenue and labour cost are assumed to cover the same 12 months. Mixing a calendar-year revenue figure with a financial-year wage bill distorts the share.
Sources

What to do about it

Labour share tells you the size of the bill. Overtime tells you where the roster and the workforce have come apart. These steps are for whoever owns the roster or the wage budget, whether or not they set headcount.

1

Split the overtime before you report it

By team, by site, by manager, by person. Overtime is almost never spread evenly. A business-wide overtime share of 5% is usually one or two teams running at 20% and everyone else near zero, and the fix is local.

2

Check the multiplier against the instrument

Overtime and penalty rates are set by the award or agreement and change by day and by hours already worked. Rerun the calculator with the real rates for the teams doing the overtime. If the payroll system is applying one flat multiplier, that is an underpayment finding waiting to happen.

3

Compare against yourself first, then your sector

Track labour share quarterly against your own trend. Then use the ABS Australian Industry release to work out your industry's wages-to-income ratio. A share that is high for your sector and rising is the signal; the national number on its own means little.

4

Price the alternative to overtime

Sustained overtime in one team usually costs more than the extra role would once penalty rates are counted, and it is paid for by tired people. Cost the extra hire or the roster change with the Headcount Planning calculator and put both numbers side by side.

5
Where a tool helps

Ask why the same people keep doing it

Persistent overtime has a cause: a seat that stays vacant, a skill only one person has, a roster built for last year's demand, a team that keeps losing people. Write the cause next to each overtime cluster. If you cannot name it, the payroll report is describing a people problem you have not measured yet.

Payroll shows the bill.
Not why it recurs.

Compono is a talent intelligence platform: an applicant tracking system and an employee engagement platform built on the same people data. Payroll and rostering tools show overtime as hours and dollars, which is where most businesses stop looking.

Step 5 asks for the cause behind each overtime cluster. Compono reads the two that matter most: whether the seat you cannot fill is being hired against a fit read that holds, and whether the team carrying the hours is drifting towards burnout and exit before the resignation arrives. The overtime figure above is the symptom. This is where you find what is driving it.

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Common questions

How are Australian overtime penalty rates set?

They are set by the modern award or enterprise agreement that covers the role, and they vary by day, time, and hours worked. The Fair Work Commission publishes the rates. Enter the multiplier that matches your instrument for an accurate figure.

Does this include superannuation and on-costs in labour cost?

That depends on the figure you enter. For a complete labour cost percentage, use a total labour cost that already includes superannuation, on-costs, and overtime, not just base wages.

Why does overtime matter beyond the cost?

Persistent overtime signals that the work and the workforce are out of balance. It raises burnout and turnover risk, which adds rehiring and retraining costs on top of the penalty rates, so the visible OT bill understates the real impact.

This page is general information, not legal advice. We check figures annually and update them on a best-efforts basis, but employment rules change and we cannot promise everything here is current or complete. Before you act on it, confirm the detail with the Fair Work Ombudsman or your own adviser. Last reviewed July 2026.

Next step

Business case

Build the business case

Turn this number into a document your CFO can question line by line.

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Headcount planning calculator

Keep the same numbers moving. The next calculator picks up where this one stops.

Run it next →HR Glossary

Penalty rates

The plain-English definition, with the calculators and rules that sit around it.

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