What is a labor cost report?

A labor cost report is a financial document that breaks down all employee-related expenses over a specific time period. It typically includes wages, payroll taxes, benefits, overtime, and other compensation-related costs. For employers, labor cost reports provide a clear picture of how much they’re spending on labor—and whether those costs align with sales, productivity, or budget goals.

With Homebase, employers can automatically generate labor cost reports based on real-time time tracking, payroll data, and shift schedules—making it easier to manage workforce expenses without relying on spreadsheets or guesswork.

What’s included in a labor cost report?

A well-structured labor cost report includes all costs tied to employing workers, not just wages. Key line items may include:

• Gross wages – Regular hourly or salaried earnings
  
  
• Overtime pay – Wages paid at time-and-a-half or other premium rates
  
  
• Employer taxes – FICA (Social Security and Medicare), FUTA, SUTA
  
  
• Paid time off – Vacation, sick leave, and holiday pay
  
  
• Benefits contributions – Employer-paid health insurance, retirement plans, wellness perks
  
  
• Bonuses and commissions – Any variable pay earned in the period
  
  
• Other labor-related costs – Workers’ compensation insurance, shift differentials, meal allowances, or uniform reimbursements
  
  

Some reports also compare actual labor costs to projected labor budgets, giving managers insights into performance, overages, and cost savings opportunities.

Why labor cost reports matter for employers

Labor is often the single largest expense for a small business. Without visibility into your workforce costs, it's easy to overspend—or underspend and risk being understaffed. Labor cost reports give business owners:

1. Cost control

By seeing exactly where your payroll dollars go, you can spot inefficiencies, reduce overtime, and make more informed hiring decisions.

2. Profit margin protection

Comparing labor cost against sales or revenue (labor cost as a % of revenue) helps ensure that staffing levels are sustainable. If labor costs regularly exceed target thresholds (e.g., 30% of revenue), it may signal a problem with scheduling, productivity, or pricing.

3. Budget alignment

With historical reports, you can build more accurate labor budgets, forecast seasonal shifts, and avoid surprises during high-volume periods.

4. Decision support

Labor cost data helps you decide when to hire, when to cut shifts, or when to raise prices—all based on real numbers, not gut instinct.

5. Accountability

Managers and department heads can see how their teams are performing in relation to labor budgets and goals, making it easier to coach or adjust operations.

When to review labor cost reports

Labor cost reports should be reviewed:

• Weekly – To stay on top of current payroll spending and make real-time scheduling adjustments
  
  
• Biweekly or monthly – To track payroll trends and compare costs against budgets
  
  
• Per pay period – To match with actual payroll runs and reconcile payroll expenses
  
  
• Quarterly or annually – To review longer-term labor cost trends, performance, and hiring ROI
  
  

Many employers also use labor cost reports when preparing for tax filings, loan applications, or board presentations.

Labor cost report vs. payroll report

While the two are closely related, they serve different purposes:

Labor cost reports give a broader view of your workforce investment, often with departmental or job-based breakdowns.

Best practices for using labor cost reports

To make the most of your labor cost reporting:

• Integrate your scheduling, time tracking, and payroll tools – This ensures the numbers are accurate and up-to-date.
  
  
• Set labor cost targets by revenue percentage – For many industries, labor costs should fall within 20–35% of total revenue.
  
  
• Compare scheduled vs. actual labor – Did you schedule efficiently, or did no-shows or overtime inflate costs?
  
  
• Review trends over time – Look for seasonal shifts, new hire impact, or recurring budget overages.
  
  
• Segment reports by role or location – See where costs are highest and whether that aligns with output or demand.
  
  

How Homebase helps you generate and use labor cost reports

Homebase gives you instant access to labor cost data that reflects your real-world operations. When you use Homebase for time tracking and payroll, labor costs are automatically calculated and visualized—so you can manage labor spend without extra tools or effort.

With Homebase, you can:

• Track labor costs in real time as employees clock in and out
  
  
• Compare scheduled vs. actual hours and wages
  
  
• Generate labor cost reports by department, location, or date range
  
  
• Monitor labor as a percentage of sales (when integrated with your POS)
  
  
• Spot trends and correct overages before they affect profitability
  
  
• Sync directly to payroll so reports match your wage payouts
  
  

Labor cost reports should be more than historical summaries—they should help you make smarter, faster decisions every week. Explore Homebase Payroll to track, manage, and optimize your labor costs with ease.