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|
|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)|
|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:
In Version 5 you can also update charge and cost rates for all current employee’s en masse from System Management > Administrator > Employee Details> Maintain Rates.
Once changed in either version the new rates will take effect from when the next new timesheets are entered.
Abtrac KB# 2036