Wages Percentage: What It Is, What's Actually Published, and What to Do When It's Wrong.
Most service business owners know wages are their biggest cost. Almost none of them know what percentage of revenue that cost represents — or whether that percentage is sustainable.
Wages percentage is the single most important number in a service business. Not revenue. Not net profit. Not the number of clients. Wages percentage — the proportion of every dollar earned that goes to staff — is the metric that determines whether the business is structurally viable or whether it's generating activity without generating margin.
Two businesses can report the same revenue and be in completely different health. In one, what's left after the wages bill covers the fixed costs, pays the owner properly, and leaves something over. In the other, the wages bill takes so much that the owner is working six days a week to keep everyone else employed. Same revenue. Only one of them is actually working.
How to calculate it
Wages percentage is the share of revenue that goes to paying people. Divide the annual wages bill by annual revenue and multiply by 100. On $312,000 of wages against $870,000 of revenue, wages percentage is 35.9%.
The wages bill includes all wages paid to staff — casual, part-time, full-time. It does not include the owner's drawings, unless the owner has a formal wage set at a market rate. If the owner works in the business and isn't paying themselves a wage, the true cost of staffing that business is higher than the number suggests — because the owner's labour has a cost even when it never appears in the books.
Example calculation
There is no single national target
There is no single published figure for "service businesses" in Australia or New Zealand, and anyone quoting one national range is quoting something nobody published. Both countries publish labour-cost ratios by industry and by turnover size, and the figures move with both. The ATO's published band for Hairdressers is 23% to 36% of turnover at $50,000 – $150,000, and 32% to 44% at More than $300,000 — the same trade, a different number at a different size. Both are 2023–24 income year figures. It is also a signal rather than a target: the ATO's own framing is that a business outside the range may have room to improve, not that the range is a number to aim at. ATO labour-cost benchmarks exclude the owner's own labour.
This is worth being blunt about, because a single tidy range is exactly what most operators are handed. An earlier version of this page carried one. It had no source behind it, and it matched no published industry-and-size pair in either country. What follows is what the two tax and statistics agencies actually publish, read straight from their own tables.
What Australia publishes
The ATO publishes small business benchmarks by industry. The row that matters here is labelled 'Labour' divided by 'Annual turnover'. Two things about it decide how you read every number below.
It is a range, but not the middle half
The published range is 30% of the population around the average. That is not the same thing as a quartile range, and it is not a band that half the industry sits inside.
“Labour” is more than wages
The ATO calculates it as: Total salary and wages expenses + Contractor subcontractor and commissions expenses − Payments to associated persons. Contractors and subcontractors are inside the number, so a business that subcontracts and a business that employs can land in the same ratio.
It is a signal, not a target
The ATO's own framing is diagnostic, not aspirational: falling outside the range means "your business may have room to improve" and, separately, that you are more likely to attract ATO attention. It is not a number to aim at.
| Industry | Annual turnover | Labour ÷ turnover |
|---|---|---|
| Hairdressers | $50,000 – $150,000 | 23% to 36% |
| $150,001 – $300,000 | 25% to 37% | |
| More than $300,000 | 32% to 44% | |
| These benchmarks don't apply to barbers or beauty services. | ||
| Barber and men's hairdressing | $65,000 – $150,000 | 24% to 40% |
| More than $150,000 | 32% to 46% | |
| Beauty services | $65,000 – $200,000 | 23% to 35% |
| $200,001 – $400,000 | 25% to 37% | |
| More than $400,000 | 27% to 39% | |
| These benchmarks don't apply to hairdressers, barbers or tanning studios. | ||
| Restaurants | $65,000 – $500,000 | 18% to 30% |
| $500,001 – $2,000,000 | 23% to 32% | |
| More than $2,000,000 | 27% to 34% | |
| Coffee shops | $65,000 – $250,000 | 21% to 32% |
| $250,001 – $600,000 | 21% to 32% | |
| More than $600,000 | 27% to 35% | |
| These benchmarks don't apply to coffee carts, vans or other mobile coffee retailers. | ||
| Electrical services | $50,000 – $200,000 | 21% to 35% |
| $200,001 – $500,000 | 17% to 30% | |
| More than $500,000 | 23% to 34% | |
| These benchmarks don't apply to auto electricians or air conditioning specialists. | ||
| Plumbing services | $50,000 – $150,000 | 21% to 34% |
| $150,001 – $600,000 | 16% to 27% | |
| More than $600,000 | 23% to 33% | |
Australian Taxation Office (ATO), 2023–24 income year. Read from the ATO's industry pages on 16 September 2026. Businesses with turnover under $30,000 or over $15,000,000 are excluded, as are businesses reporting multiple activities on their tax returns and businesses trading less than one year.
Read down the trades and the pattern is the one an operator most needs to see. Plumbing services sits at 16% to 27% in the $150,001 – $600,000 band, and 23% to 33% more than $600,000. The ratio rises with size, because the owner stops doing the work themselves and starts paying other people to do it. A single national band hides exactly that movement.
The part that catches owner-operators
ATO labour-cost benchmarks exclude the owner's own labour.
The ATO builds its labour figure as Total salary and wages expenses + Contractor subcontractor and commissions expenses − Payments to associated persons. That last subtraction takes the owner and their associates back out.
So the published band describes what a business pays other people — not what it costs to staff the business.
An owner-operator who compares their own wages line to that band is comparing unlike things. They will look "efficient" for a reason that has nothing to do with efficiency: their own labour is free in the data and unpaid in life.
The honest comparison adds the owner back at a market rate for the hours they actually work, then compares. A salon owner cutting hair 40 hours a week at 22% wages is not beating a salon at 34% — they are likely paying themselves nothing.
“Wages percentage is the number that determines whether the business compounds or treads water. Most owners discover they've been treading water for years when they finally calculate it.”
What New Zealand publishes
New Zealand's figures come from a different agency, over a different measure, in a different shape — so they are set out separately here, and they should not be placed side by side with the Australian ones. Stats NZ publishes a salaries and wages / turnover ratio at the 25th percentile / median / 75th percentile (interquartile range). The numerator is salaries and wages, and payments to contractors are excluded from it.
Size bands are built from each industry's own turnover distribution: We calculate size bands based on turnover. We produce four even quarters of the industry population based on the number of businesses to help you find the most comparable indicators for your business size (i.e. micro, small, medium, or large). A minimum of 30 responding units in each quartile (120 per industry) is required for an industry's ratios to be published.
| Industry | Size band (turnover) | 25th / median / 75th |
|---|---|---|
| Hairdressing and beauty servicesS951100 | Micro $60,000 – $99,000 | 0% / 0% / 0%no payroll — see below |
| Small $99,001 – $169,000 | 0% / 0% / 25%no payroll — see below | |
| Medium $169,001 – $335,000 | 1% / 26% / 46% | |
| Large $335,001 – $10,000,000 | 24% / 39% / 51% | |
| Half or more of the businesses in this band record a 0% salaries-and-wages ratio. That is not cheap labour — it is no payroll. The only worker is the owner, and the owner's labour is unpaid in the data. | ||
| Cafes and restaurantsH451100 | Micro $60,000 – $249,000 | 0% / 11% / 30%no payroll — see below |
| Small $249,001 – $506,000 | 16% / 29% / 39% | |
| Medium $506,001 – $972,000 | 24% / 34% / 42% | |
| Large $972,001 – $10,000,000 | 27% / 36% / 42% | |
| At least a quarter of the businesses in this band record a 0% salaries-and-wages ratio: no payroll, because the only worker is the owner. It is not cheap labour. | ||
| Takeaway food servicesH451200 | Micro $60,000 – $180,000 | 0% / 0% / 14%no payroll — see below |
| Small $180,001 – $349,000 | 0% / 10% / 25%no payroll — see below | |
| Medium $349,001 – $665,000 | 10% / 21% / 30% | |
| Large $665,001 – $10,000,000 | 19% / 27% / 32% | |
| Half or more of the businesses in this band record a 0% salaries-and-wages ratio. That is not cheap labour — it is no payroll. The only worker is the owner, and the owner's labour is unpaid in the data. | ||
| At least a quarter of the businesses in this band record a 0% salaries-and-wages ratio: no payroll, because the only worker is the owner. It is not cheap labour. | ||
| Electrical servicesE323200 | Micro $60,000 – $136,000 | 0% / 0% / 0%no payroll — see below |
| Small $136,001 – $259,000 | 0% / 0% / 2%no payroll — see below | |
| Medium $259,001 – $653,000 | 0% / 9% / 24%no payroll — see below | |
| Large $653,001 – $10,000,000 | 11% / 22% / 32% | |
| Half or more of the businesses in this band record a 0% salaries-and-wages ratio. That is not cheap labour — it is no payroll. The only worker is the owner, and the owner's labour is unpaid in the data. | ||
| At least a quarter of the businesses in this band record a 0% salaries-and-wages ratio: no payroll, because the only worker is the owner. It is not cheap labour. | ||
| Plumbing servicesE323100 | Micro $60,000 – $161,000 | 0% / 0% / 0%no payroll — see below |
| Small $161,001 – $345,000 | 0% / 0% / 10%no payroll — see below | |
| Medium $345,001 – $828,000 | 0% / 11% / 22%no payroll — see below | |
| Large $828,001 – $10,000,000 | 12% / 22% / 31% | |
| Half or more of the businesses in this band record a 0% salaries-and-wages ratio. That is not cheap labour — it is no payroll. The only worker is the owner, and the owner's labour is unpaid in the data. | ||
| At least a quarter of the businesses in this band record a 0% salaries-and-wages ratio: no payroll, because the only worker is the owner. It is not cheap labour. | ||
| Automotive electrical servicesS941100 | Micro $60,000 – $166,000 | 0% / 0% / 0%no payroll — see below |
| Small $166,001 – $329,000 | 0% / 0% / 11%no payroll — see below | |
| Medium $329,001 – $748,000 | 0% / 14% / 27%no payroll — see below | |
| Large $748,001 – $10,000,000 | 14% / 23% / 31% | |
| Half or more of the businesses in this band record a 0% salaries-and-wages ratio. That is not cheap labour — it is no payroll. The only worker is the owner, and the owner's labour is unpaid in the data. | ||
| At least a quarter of the businesses in this band record a 0% salaries-and-wages ratio: no payroll, because the only worker is the owner. It is not cheap labour. | ||
Stats NZ (Statistics New Zealand); ratio data sourced from Inland Revenue tax data, 2025 financial year (Stats NZ). Read from benchmark_ratios_all_industries-2025-anzsic-class.csv ("Benchmark ratios for all industries: 2025 – CSV", 407 KB) on 16 September 2026. All businesses supplying financial statements and tax returns are included, where the turnover (total income) for those businesses is between $60,000 and $10 million. Industries are classified under ANZSIC06. Of 483 industries, 228 have enough businesses for reliable ratios in the 2025 edition.
The zeros are the most important thing on that table, and the easiest to misread. Hairdressing and beauty services reads 0% / 0% / 0% in the Micro $60,000 – $99,000 band and 24% / 39% / 51% in the Large $335,001 – $10,000,000 band. The first is not a salon with miraculously cheap staff. It is a salon with no staff.
One thing we will not tell you, because it isn't published: whether New Zealand takes the owner back out of the figure the way Australia does. New Zealand's owner-labour treatment is UNCONFIRMED. The AES questionnaire splits the line into "Paid to working proprietors and partners" + "Paid employees", which points to proprietors being included — but the benchmark ratios are sourced from Inland Revenue tax data, not that form, and the inclusion could not be confirmed. The zeros across the bottom size bands are consistent with owner-operators simply having no payroll, but that is an inference from the data, not a published statement.
Why you can't compare the two countries
Different ranges
The ATO range is "30% of the population around the average". The Stats NZ range is the 25th-to-75th percentile (the middle 50%). A NZ range will look wider than an AU range for reasons of method, not because NZ businesses vary more. Any UI that shows both must not imply they are the same measure.
Different numerators
"Labour" (AU) and "salaries and wages" (NZ) are not the same numerator. The ATO adds contractor, subcontractor and commission expenses into labour. Stats NZ's stated numerator is salaries and wages, and its AES form explicitly says don't include payments to contractors. For trades, where subcontracting is routine, this difference alone can move the ratio by a wide margin. An AU trade figure is therefore structurally higher than an NZ one for the same business.
Different owner treatment
Australia explicitly subtracts payments to associated persons, so owner labour is out. New Zealand's treatment is UNCONFIRMED — see OWNER_LABOUR_CAVEAT.newZealand.
Different industry classes
Stats NZ has one ANZSIC class, S951100 "Hairdressing and beauty services". There is no separate NZ beauty class, and no NZ barber class. Australia splits all three. No neighbouring industry was substituted. The ATO publishes Restaurants, Coffee shops, Takeaway food services and Catering services as separate benchmarks with different turnover bands and different labour ranges. New Zealand publishes cafes and restaurants as a single class (H451100). The two countries' food-service figures cannot be placed side by side as like-for-like. Restaurants and Coffee shops are carried separately rather than inventing a blended AU number.
What misleads if you read it quickly
- The NZ 0% rows are the biggest trap. They are real, but they do not mean labour is free in NZ trades. They mean most sub-median NZ tradies and salon owners have no employees. Publishing 0% as a benchmark without that sentence beside it would be actively harmful.
- The ATO's middle trade bands sit lower than the high-turnover bands (plumbing 16% to 27% in the middle band against 23% to 33% above $600,000). Wages ratios rise with size as owners stop doing the work themselves. A single national target band hides exactly the dynamic an operator needs to see.
Why it gets too high
Wages percentage gets too high for three reasons: revenue is too low (usually a pricing or volume problem), staffing hours are too high relative to the revenue those hours produce, or both at once. The most common situation is both — underpriced services generating too little revenue to cover the hours required to deliver them.
A business with underpriced services and more staff than the revenue can support will have a high wages percentage regardless of how efficiently the roster is managed. The efficiency gain from tightening the roster is wiped out by the pricing gap. Conversely, a business that raises prices but doesn't review the staffing structure may improve margin on paper while still carrying hours the business doesn't need.
How to fix it — the right order of operations
Fix the right thing in the right order. Don't start by cutting wages — start by identifying whether the problem is revenue (pricing, transaction value, volume) or hours (roster, productivity, role efficiency). If it's pricing, fix that first. If it's hours, assess the roster after pricing is set. Cutting hours before fixing pricing creates a worse client experience without solving the underlying margin problem.
If transaction value is the issue — the average job or appointment isn't generating enough — the answer is pricing. Fix pricing before touching the roster. A correctly priced service business with a tight roster is structurally sound. The same roster with the same hours but underpriced services will not get where it needs to be, no matter how efficiently it's managed.
If pricing is already right and the percentage is still too high, the issue is hours — usually a roster that hasn't been reviewed against actual revenue production. Not all hours are equal. A four-hour morning shift in a hair salon generates different revenue than a four-hour afternoon shift. A roster built around availability rather than production will carry the wrong hours.
The correct sequence: set pricing correctly. Then work out what staffing level that pricing can sustainably support. The published bands don't answer that question for you — they tell you whether the number you're running is ordinary or unusual for a business of your type and size, which is the start of the conversation rather than the end of it.
Sources
Australian Taxation Office (ATO) — 2023–24 income year
Every ATO industry page carries: "Performance benchmarks use information reported on tax returns for the 2023–24 financial year and are updated each year. This is the most current data."
Stats NZ (Statistics New Zealand); ratio data sourced from Inland Revenue tax data — 2025 financial year (Stats NZ)
https://statisticsnz.shinyapps.io/bpbench/ is stale (last updated 30 June 2021, 2019/20 financial year). Figures here come from the 2025 CSV, not the tool.
- benchmark_ratios_all_industries-2025-anzsic-class.csv ("Benchmark ratios for all industries: 2025 – CSV", 407 KB)
- Business performance benchmarker
- Information about the data
Most of this data sits below the AES design level: "use this data with caution as it is not covered by our quality checks"; and "a business can have operations classified into more than one industry, which can affect the industry financial ratios produced. These ratios should be used with caution." Suppressed values are marked 'S', confidentialised 'C'. None of the rows carried here were suppressed or confidentialised.
All figures on this page were read from those pages and files on 16 September 2026. Both sets are updated annually, and each carries its own tell. If the ATO industry pages stop saying "2023–24", the AU figures here are stale. If the CSV filename stops saying -2025-, the NZ figures here are stale.
Free calculator
Calculate your wages percentage now.
Enter your hourly rate, total staff hours, and revenue. The calculator turns them into an annual wages bill, shows it as a percentage of revenue, and works out the true annual cost of an employee — including super and leave loading in Australia, KiwiSaver in New Zealand. Then read it against the published band for your industry and size, above.