Personnel Expense as a Percent of Gross

Personnel expense as a percent of gross is how much of every gross profit dollar goes to pay: salaries, commissions, benefits and payroll costs. For a franchised store, personnel and selling expense should stay at or under 50% of gross, with 45% best in class (Pocket20 benchmark).

The formula

Personnel expense % of gross = total personnel (and selling) expense ÷ total gross profit

Example (hypothetical round numbers): $3.3 million of personnel and selling expense on $6.0 million of gross is 55%. At the 50% bar, the same gross would carry $3.0 million, so about $300,000 of net is going to pay above the benchmark.

Benchmarks

• Whole store, franchised: personnel plus selling expense at or under 50% of gross, 45% best in class (Pocket20 benchmark).

• Service department: service personnel and compensation at or under 50% of service gross (Pocket20 benchmark).

Why it matters

Pay is the biggest expense on the statement, so it is usually the biggest lever on net. A store can produce strong gross and still miss its net because pay plans grew faster than the gross they pay on. Read it with Net-to-gross: when net-to-gross is low, personnel is the first place to look.

How to find it on the statement

• The expense page breaks out salaries, commissions, supervision, clerical, and payroll taxes and benefits, by department.

• Add the personnel lines together, then divide by the matching gross for the same period.

• Use the year to date.

What moves it

• Pay plans tied to the right number. Pay on gross the store actually keeps, not on volume alone.

• Headcount to volume. Staff to the store's real sales and repair-order count, not to last year's.

• Commission on front gross versus total gross. Know which one each plan pays on, and whether it rewards holding gross.

See it on your own statement

Pocket20 reads every personnel line on your statement, measures it against gross, and shows the dollars above the benchmark. Get a free read or see a sample read.