I don't know about 5 percent, but I've heard of a 1% standing army and 1% police force. During a wartime scenario, the police can be pulled into the army quickly. With more time to conscript during a full-time fight or death scenario approximately 25% of the citizens would be of fighting material.

A town of 1000 would have 10 in their "army" and 10 in their police force. This might translate into 10 in a police hierarchy, and 10 deputies on the lowest rung. Or 1 sheriff, 9 guards, and 10 deputies. Heck you could even do 10 guards, and 10 mercenaries that the guards can hire on the spot. It all depends on how you want to spin it.

Regardless, in a town of 1000, you may be looking at NPCs level 1-3 with a few outliers in the 4 to 5 range. So the fight should be as someone said earlier. The guards are giving the townspeople a few extra seconds to escape the PCs murderous rampage.