How to Calculate an Annual Labor Budget
- 1). Add up the hourly wages of all your employees. Record this number as your hourly wage expense. For example , if you have three employees who each make $8 per hour and another who makes $15 dollars per hour, your hourly wage expense would be $39.
- 2). Multiply your hourly wage expense by 40. Record this number as your weekly wage expense. If you apply this to the previous example, multiply a $39 hourly wage expense by a 40-hour work week to get a $1,560 weekly wage expense.
- 3). Multiply your weekly wage expense by 52. Record this amount as your yearly wage expense. Continuing your example, multiply the $1,560 weekly wage expense by 52 weeks in a year to get an $81,120 yearly wage expense.
- 4). Add the yearly salaries of your non-hourly employees to the yearly wage expense. Record this number as your total yearly wage expense. In the example, assume you also have a manager who makes $30,000 per year and an assistant manager who makes $25,000 per year. Adding these salaries to your $81,120 yearly wage expense gives you a total yearly wage expense of $136,120.
- 5). Multiply your total yearly wage expense by 120 percent. The extra 20 percent accounts for typical anticipated costs for overtime, raises and bonuses. This number is your adjusted total yearly wage expense. Apply this step to your total yearly expense of $136,120 to get an adjusted yearly wage expense of $163,344.
- 6). Set aside the amount of your adjusted total yearly wage expense as your budgeted amount for labor for the year. This amount does not cover hourly pay or salaries for new employees.
