Revenue per employee calculator with labour share

What this calculator does

Revenue per employee is the quickest way to compare productivity between businesses of different sizes, and on its own it is close to useless. A figure of $267,000 means nothing until you know what the employees cost, because a business generating that on $120,000 of cost per head is in a very different position from one generating it on $200,000.

The pairing that matters is revenue per employee against labour share of revenue. The first says how much each person brings in, the second says how much of it they consume, and the gap between them is what the business has left to run on.

The formula

Formularevenue per employee = revenue ÷ FTE. Labour share = total employment cost ÷ revenue

Revenue per employee is revenue divided by full-time equivalent staff rather than by headcount, because two half-time people are not two people. Labour share is total employment cost divided by revenue, and the inverse of that is the revenue generated per dollar of employment cost, which is the figure most comparable across industries.

Term	Meaning
FTE	Full-time equivalent, not headcount. The FTE calculator converts part-time hours into it.
Employment cost	Total cost including on-costs, not salary. The total employment cost page works it out.
Labour share	Employment cost as a share of revenue. Highly industry-specific.
Revenue per dollar of cost	The inverse of labour share. Above 2 means labour consumes less than half of revenue.

The inputs explained

Field	What to enter
Annual revenue ($)	Annual revenue, not profit and not gross margin.
Full-time equivalent staff	Full-time equivalent staff over the same period, including contractors if their cost is in the cost figure.
Total employment cost ($)	Total employment cost including on-costs. Using base salary here understates it by a quarter or more and makes the labour share look better than it is.

When to use it

Benchmarking against your industry

Compare the labour share rather than the revenue per employee. Professional services commonly run at 50 to 70 per cent and software far below that, so the absolute revenue figure tells you more about the sector than about the business.

Testing whether a hire pays for itself

The revenue a new hire must add to hold the ratio is the current revenue per employee. If a role cannot plausibly add that much, the ratio falls, which may still be the right decision but should be a decision rather than a surprise.

Watching the trend rather than the level

A single year's figure is close to meaningless without a comparison. The same calculation on last year's numbers tells you whether the business is getting more or less out of each person.

Worked examples

Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.

How does revenue growth move the ratios?

Only the revenue changes, so this is the picture if the team stays the same size.

45 FTE and $5.4m of employment cost held constant

Annual revenue	Revenue per employee	Labour share of revenue	Revenue per employee above their own cost
$6m	$133,333.33	90.0%	$13,333.33
$9m	$200,000.00	60.0%	$80,000.00
$12m	$266,666.67	45.0%	$146,666.67
$18m	$400,000.00	30.0%	$280,000.00
$24m	$533,333.33	22.5%	$413,333.33

At $6m the labour share is 90 per cent and each employee generates only $13,333 above their own cost, which leaves almost nothing for everything else the business has to pay for. At $12m the share halves to 45 per cent and the figure rises to $146,667. At $24m it is 22.5 per cent and $413,333. Doubling revenue with the same team more than doubles what each person contributes, because their cost does not move.

What does employment cost do to the same revenue?

The revenue and the team size are fixed and the cost of that team changes.

$12m of revenue across 45 FTE

Employment cost	Labour share of revenue	Revenue per dollar of employment cost	Revenue per employee above their own cost
$3m	25.0%	4.00	$200,000.00
$4.5m	37.5%	2.67	$166,666.67
$5.4m	45.0%	2.22	$146,666.67
$7.2m	60.0%	1.67	$106,666.67
$9m	75.0%	1.33	$66,666.67

Revenue per employee is $266,667 in every row, which is exactly why it cannot be read alone. The labour share runs from 25 to 75 per cent across the same revenue and the same headcount, and the revenue per dollar of cost from 4.00 down to 1.33. Two businesses reporting identical revenue per employee can be in completely different health.

Questions

Should I use headcount or FTE?

FTE. Headcount treats a part-time person as a whole one and inflates the apparent team size, which deflates revenue per employee. The FTE calculator does the conversion.

Do contractors count?

Only if you are consistent. Include them in both the FTE count and the cost figure, or in neither. Including their cost but not their FTE makes the labour share look worse than it is.

What is a good revenue per employee?

There is no cross-industry answer. Software companies routinely clear $300,000 and labour-intensive services sit far below it, so the figure is only meaningful against your own history or direct competitors.

Why use employment cost rather than salary?

Because the employer pays the on-costs too. Base salary understates the real cost by a quarter or more, which makes the labour share look considerably healthier than it is.

Does this measure productivity?

Loosely. It measures revenue against people, which is affected by pricing, product mix and outsourcing as much as by how hard anyone works. Treat a change in it as a prompt to ask why rather than as an answer.

For the cost side of the ratio see total employment cost and for the headcount side FTE. Growth in the ratio over time is on year-over-year growth.