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• # Key # 8 Labor Gross Profit – cost of a technician to perform the repair

Posted by on January 11, 2018 at 11:00 am

I know this might sound silly but I have question regarding cost of a technician to perform the repair.

In our country we have multiple labor taxes but I won’t go into details too much. I’ll give an example:

Let’s say my technician does 3500 Eur monthly in labor sales after VAT. As per our agreement I pay 30% interest to my technician which is 1050 Eur. In order to pay out 1050 Eur to my technician I have spend 1 377,39 Eur in total in which 327,39 Eur is social insurance tax (mandatory tax payed by employer).

So my question is should I include 327,39 Eur social insurance tax into cost of a technician to perform the repair when calculating Labor Gross Profit.

Thank you.

replied 4 years, 4 months ago 3 Members · 3 Replies
• 3 Replies
• ### Tom Ham

Member
January 12, 2018 at 8:35 am

You can do it either way depending on what you use for a labor GP goal.

The most common method in the U.S. would to be not to include it because if you do then you really should include all other employee costs of all kinds which can vary from one shop to another so it becomes difficult to compare them accurately.

A typical range here would be a GP of 70% – 74% if they are not included. If I am grasping the math correctly your labor GP would need to be in the 77% – 81% range to accomplish the same profit.

Hope that helps!

• ### Randy Lucyk

Member
January 15, 2018 at 2:23 pm

I have a little different view of this. It looks like this single tax(social insurance) is 32% of wages vs 6% in our world. With numbers as high as yours, I would use that cost as part of my direct cost and as such use it in my labor rate calculation and gp% on labor percentage calculation, just as if it was wages.  Their are other variables we do not know, so it is difficult to comment on whether 70-75% would still be consider a good target for return on labor dollars or not. I suspect it would still be somewhat close.

• ### SSF

Member
February 14, 2018 at 9:12 am

Thank you for your input gentlemen. Much appreciate it. I’ll include social insurance taxes into my direct costs in further calculations.

Then fun part is that I didn’t mention. My employee has to pay his own taxes from 1050 Eur he gets which is 243,75 Eur. So at the end my employee gets 806,25 Eur.

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