# Personnel expense ratio

The personnel expense ratio is an economic key figure that sets the personnel expenses in relation to the sales revenue or the overall performance of a company.

## Definition / explanation

The personnel cost ratio indicates how many personnel is required in a company in order to generate a certain profit. In other words, it quantifies the amount of Personnel coststhat are necessary to wager a certain amount.

## Calculation of the personnel expense ratio

To calculate the key figure, the personnel expenses are divided by the total performance and multiplied by 100.

Personnel expenses ratio = (personnel expenses / total output) * 100

Personnel costs are made up of many factors - for example:

• Wages and salaries
• Social security costs
• Training costs

In the calculation, the entire turnover is still used as the total output - this is, however, an inaccurate approach. If possible, all company services should be offset. This also includes half-finished work and products as well as one-off payments to the workforce.

## What does the personnel cost ratio say?

The personnel cost ratio says a lot about the labor intensity of a product or the degree of rationalization of a company. Changes in personnel cost intensity can thus be identified more quickly over a period of several years. This is due, for example, to wage increases or an above-average change in the workforce.

Together with other parameters such as the return on sales or the cost of materials ratio, weak points or trends in the development of the company can be identified.

## How is the personnel expense ratio reduced?

Measures to reduce the personnel cost ratio are, for example:

• Arbeitsplatzabbau oder Outsourcing
• Delegate work to temporary workers or freelance workers
• Check and optimize production processes
• track down internal reserves

annotation - In general, only enough staff should be saved so that operational processes are not disrupted and regular work is possible.

## Summary

• Personnel expenses ratio relates personnel expenses to sales revenues or overall performance of a company
• Formula: staff cost ratio = (staff costs / total output) * 100
• For the most accurate calculation possible, all the company's services should be included in the overall service
• Personnel costs can be reduced through optimized production processes, personnel outsourcing and job cuts
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### Synonym für / Anderes Wort für

• labor cost ratio