Definition
The personnel expense ratio is a business indicator that puts the personnel expenses reported in the income statement in relation to the total output of a company. The following formula is used to calculate it: Personnel expense ratio = Personnel expense / Total output.
The personnel cost ratio allows conclusions to be drawn about the wage level and the fixed cost burden and thus about the financial flexibility of a company in times of fluctuating employment. As a key figure, it enables direct comparison with other companies in the sector. Companies with a personnel cost ratio of more than 50% of total output are considered to be personnel cost-intensive. Production companies should have a ratio of around 30%, while a value of 60% is considered good for service companies.
Bettina Dirks
