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Calculate your direct payroll costs and total payroll costs as a percentage of net sales.  You can calculate direct payroll costs (direct costs associated with assembly, production of your products). You can also calculate all of the payroll costs for everyone in the organization to see if you are making progress (smaller percentage) or falling behind (larger percentage).  Are you becoming more productivity (less payroll expense for a dollar of sale?).  Payroll includes all base pay, overtime, jury duty, vacation, bonuses, incentives associated matching payroll taxes (SUTA, FUTA and FICA), workers’ compensation insurance coverage, medical and dental insurance, matching #401K contribution and any other individual company contributed costs associated with payroll expenses.  You want payroll expenses to decline which indicates 1.) you have better productivity because of machinery and equipment you installed, 2.) your employees creating sales are more productive (more sales, less payroll expense), 3.) your price increases are outpacing your payroll costs and 4.) payroll increases have been higher than price increases (increasing percentage). All companies’ cost structure are different so in order to see a pattern, measure your company from one or two years ago month by month or quarter to quarter until now.  Adjust for products you have farmed out (assigned to outside production facilities).

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