Employee Cost Rates

To ensure your profitability reports are as accurate as they can be, it’s a good idea to review your employee cost rates regularly. The new year is as good a time as any to check your management data is up to date.

The Cost Rate per Chargeable Hour is the employee salary rate, plus an overhead allocation, divided by the budgeted chargeable hours that person will work in a year.

The accounting applied here is without regard for write-offs which are often also factored into the cost rates.

Obviously individual costs vary per employee. Most business apply a standard cost per grade of employee. This mitigates the likelihood a specific employee will be upset to think a peer is being paid more than them. It also acknowledges the fact that accounting is an art as much as a science and across any financial period productivities will vary and gains and losses will occur over which you have no control.

See the following for a detailed example :
Total Cost / Chargeable Hours = Cost Rate per Chargeable Hours

110,000/1236 = $89.00

Total Employee Cost

Cost Item	Annual Cost	Comments
Annual Salary	80,000	Salary, including bonuses
Office Overheads	25,000	e.g rent, electricity, internet, telephone etc
Superannuation Contributions	4,000
Training	1,000
Other Employee Allowances
Total Employee Cost	110,000

Total Chargeable Hours

Hours Worked	Days per Annum	Comments
Weekday Days	260.70	Calculated as 365 x (5 / 7)
Statutory Holidays	-10.00
Annual Leave	-20.00
Sick Leave	-5.00
Training Days	-5.00
Total Chargeable Days available	220.70
Chargeable Hours available	1766.00	Calculated as 8 hours per day x 220.7 days
Chargeable Percentage	70%	less time spent supervising others, personal emails etc
Total Chargeable Hours	1236.00	Calculated as 70% of Chargeable Hours available

Individual Employee Cost rates can be updated from:

Administration > Employees.

Once changed, the new rates will take effect from when the next new timesheets are entered.

Abtrac KB# 2036

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