What Is a Good Labour Gross Profit Margin for a Workshop?
A good labour gross profit margin for a workshop is between 60% and 70%. Below 60% means wage costs are consuming too much of your labour revenue; above 70% indicates strong pricing and cost control. Most independent workshops sit somewhere in the 55–68% range — with many not knowing their exact figure at all.
A good labour gross profit margin for a workshop is between 60% and 70%. Below 60% means wage costs are consuming too much of your labour revenue; above 70% indicates strong pricing and cost control. Most independent workshops sit somewhere in the 55–68% range — with many not knowing their exact figure at all.
Most workshop owners know their hourly labour rate. Fewer know their labour gross profit margin — and the difference between those two groups tends to show up in the bank account.
Your labour rate is what you charge. Your labour gross profit (LGP) is what you actually keep after paying your technicians. It is one of the most important numbers in your business, and for many workshops, it is also one of the most misunderstood.
What Is Labour Gross Profit?
Labour gross profit is the percentage of your labour revenue left over after deducting the direct cost of your technicians — their wages and superannuation.
The formula is straightforward:
LGP% = (Labour Rate − Tech Cost Per Hour) ÷ Labour Rate × 100
For example: if your labour rate is $180/hr and your average tech costs $38/hr in wages and super, your LGP is ($180 − $38) ÷ $180 × 100 = 78.9%.
That means for every dollar you bill in labour, you keep roughly 79 cents before rent, insurance, equipment, utilities, and your own wage come out.
Why tech cost per hour? The most practical way to calculate tech cost is to take each technician’s annual salary plus superannuation and divide by approximately 1,800 — the number of productive hours in a working year. A technician on $65,000 including super costs roughly $36/hr. This is the figure to use, not their hourly pay rate.
What Are the Industry Benchmarks?
Based on data from over 6,500 workshops on the Workshop Software platform, here is how LGP performance breaks down:
The healthy benchmark range of 60–70% is widely referenced across the automotive aftermarket. Workshops consistently above 70% tend to have a combination of a well-reviewed labour rate and careful management of overtime and roster costs.
Why LGP Matters More Than Labour Revenue
Two workshops can generate identical labour revenue and have very different businesses.
Workshop A bills $25,000 per month in labour. LGP is 55%. Labour profit: $13,750.
Workshop B bills $22,000 per month in labour. LGP is 72%. Labour profit: $15,840.
Workshop B is generating $2,090 more labour profit per month — nearly $25,000 per year — despite lower revenue. The owner of Workshop B has more money to service debt, invest in equipment, pay themselves, or build a buffer.
This is why revenue can be a misleading headline. LGP is the metric that tells you how efficiently you are converting your most valuable resource — your technicians’ time — into actual profit.
Why Do Workshops End Up with a Low LGP?
The most common cause is a labour rate that has not kept pace with wage increases. Wages tend to increase gradually each year — through award increases, market pressure, or retention decisions — while labour rates often go years without review. The margin quietly compresses.
Other contributing factors include:
- Overtime costs that inflate the effective tech cost per hour beyond the base salary figure
- Superannuation increases that are absorbed without adjusting the rate
- Generous rostering — paying for more hours than are actually being billed
- A rate that was never properly benchmarked in the first place
A $10/hr rate increase, applied across three technicians billing 35 hours per week, adds $54,600 in revenue per year — all of which flows directly to gross profit, because your wage costs have not changed. This is why a rate review is often the single highest-return action available to a workshop owner.
How to Calculate Your LGP Right Now
You need three numbers: your labour rate, your average tech cost per hour, and your billable hours. Use the Workshop University Labour Gross Profit Calculator to calculate your margin instantly — it shows your weekly, monthly, and annual breakdown, where you sit against industry benchmarks, and what a rate adjustment would mean for your bottom line.
Labour Gross Profit Calculator →Three Things to Do This Week
- Calculate your actual tech cost per hour for each technician: annual salary + super ÷ 1,800. Average across your team. This is your real cost figure.
- Check when you last reviewed your labour rate — if it was more than 12 months ago, put a review in the diary.
- Run your numbers through the LGP Calculator and note your current margin and the gap to the 60% and 70% benchmarks.
Use the Labour Gross Profit Calculator to calculate your margin and see what the industry benchmarks mean for your specific numbers.
Labour Gross Profit Calculator →Frequently Asked Questions
What is labour gross profit margin?
Labour gross profit margin (LGP) is the percentage of your labour revenue remaining after deducting the direct cost of paying your technicians — their wages and superannuation. It is calculated as: (Labour Rate − Tech Cost Per Hour) ÷ Labour Rate × 100. It measures how much of every labour dollar billed your business actually keeps before overheads.
What is a good labour gross profit percentage for an auto repair workshop?
A good labour gross profit percentage is between 60% and 70%. Below 60% indicates that wage costs are too high relative to your labour rate and should be addressed through a rate review. Above 70% is considered excellent. Most independent workshops benchmarked on industry data fall somewhere between 55% and 70%.
How do I calculate my workshop’s labour gross profit?
Subtract your average technician cost per hour (annual salary + super ÷ 1,800) from your posted labour rate, then divide the result by your labour rate and multiply by 100. For example: ($180 rate − $38 tech cost) ÷ $180 × 100 = 78.9% LGP. The Workshop University LGP Calculator does this automatically and shows weekly, monthly, and annual profit figures.
Why is my labour gross profit lower than I expected?
The most common reasons are: a labour rate that has not been reviewed recently and has fallen behind wage increases; overtime and superannuation costs pushing tech cost higher than the base salary suggests; or paying for more technician hours than are being billed. Any one of these can compress your LGP significantly without the change being obvious in day-to-day operations.
How does labour gross profit differ from net profit?
Labour gross profit measures revenue minus direct technician wage costs only. Net profit is what remains after all costs — rent, utilities, insurance, equipment, administration, your own wages, and all other overheads — are deducted from total revenue. LGP is a leading indicator: if it is low, net profit will almost certainly be under pressure. A strong LGP gives you the margin to absorb overhead costs and still generate a sustainable net profit.
How often should I review my labour gross profit margin?
At a minimum, once per year — and ideally once per quarter. LGP changes gradually as wages increase, super rates rise, and billing patterns shift. A quarterly review catches compression early, when a modest rate adjustment can restore the margin rather than a large correction being needed.
What is the relationship between labour gross profit and labour rate?
Your labour rate is the single biggest lever for improving LGP. Because tech wage costs are largely fixed, a rate increase flows almost entirely to gross profit. A $10/hr rate increase across three technicians at 35 hours per week adds $54,600 per year — all of it to LGP. Reviewing your rate annually is the most reliable way to maintain a healthy margin.