Ask what an hour costs and most people say the hourly rate. It is the number on the contract, it is the number in the rota, and it is not what leaves the business.
Getting to the real figure is a twenty-minute exercise, and it changes how several other decisions look.
Everything in the number
Start with the gross hourly rate, then add:
Employer social security contributions. In continental Europe this is the largest single addition and it varies enormously by country and sometimes by contract type. It is not a rounding error - it is the item that makes European and American benchmarks incomparable.
Paid leave. Statutory holiday is hours you pay for and get no work from. Spread across the year it is a straight percentage uplift on every productive hour.
Public holidays, on the same logic, plus any premium you pay for working them.
Sick pay, to whatever extent you carry it.
Premiums - night, weekend, split shift, overtime, on-call. These do not apply to every hour, but they apply to the hours you are usually short of, which is exactly when you are making the decision.
Non-productive paid time. Induction and training. Briefings. Handover. Travel between sites where that is working time. Mandatory certification renewal. All paid, none of it producing anything directly.
Turnover, amortised. Recruitment, onboarding, the cover you paid for while the post was open, and the productivity of somebody learning. Divided across the hours that person will actually work, it is a real per-hour number and it gets larger the shorter they stay.
The multiplier, and how to get yours
The single most useful thing to calculate is your loaded hour:
total annual employment cost ÷ productive hours
The trap is the denominator. Divide by paid hours and you will understate it, because holiday, sickness, training and handover are paid and not productive. Divide by the hours people are actually available to do the work, and the multiplier tells you the truth.
For most European operations the result lands somewhere between about 1.3 and 1.6 times the gross rate, and the spread across our markets is wide. It is worth knowing your own figure rather than a sector average, because it is a number you will use constantly once you have it.
Why imported benchmarks are wrong here
There is a lot of guidance in English about keeping labour under some percentage of revenue. Most of it originates in the US or the UK, and it does not transfer.
Prime cost - labour plus cost of goods - typically runs around 60–70% of revenue in UK and US benchmarks, and roughly 65–76% in continental Europe. The difference is not that European operations are badly run. It is that employer social contributions are inside the European figure and largely outside the American one.
So a target imported from an American operations blog will look achievable, will not be, and will cause you to conclude your business is failing when it is performing normally for its market. If you use a benchmark, use one calculated the way you calculate.
There is a second European wrinkle worth stating plainly: revenue in these ratios should be net of VAT. Comparing a gross revenue figure against a cost base gives a flattering percentage and an inconsistent one.
What changes once you know it
The 7am gap gets expensive fast. An unfilled shift covered at overtime rates, on a loaded hour, can cost close to double the headline rate. That reframes what it is worth spending to avoid the gap - on coverage depth, on a bank of casual staff, on giving enough notice that people do not leave.
Short shifts stop looking wasteful. A four-hour shift over the peak is often cheaper than the alternative, and the loaded-hour view is what makes that legible.
Training stops looking like a cost centre. Cross-training is paid non-productive time, so it shows up as pure cost - until you price the agency booking and the unapprovable holiday it prevents.
Retention becomes a line you can defend. Turnover amortised per hour is the number that turns "notice periods matter" from a nice sentiment into a budget argument.
The weekly version
You do not need to rebuild this every week. Calculate the multiplier once or twice a year, then use it:
- Total employment cost for the week, including contributions
- Revenue for the same week, net of VAT
- The percentage, and the gap to target
- Last week's percentage and the direction
- One sentence on why it moved
Five lines. What the multiplier adds is that the first line is the real cost rather than the wage bill, which is usually somewhere between a quarter and a half less than the truth.