CalculationLabor Hourly Rate and Billing Rate
Labor Hourly Rate and Billing Rate
Converts gross labor through surcharges, absenteeism, and billable ratio to the cost of a productive hour and the billing rate.
How to use the result
The cost rate is the value used for an operator hour in machine calculations. Include overhead and profit only in the charge-out rate if they are not added elsewhere in the calculation; otherwise they are counted twice.
Absence has the greatest effect: deducting 30 days of leave and 10 public holidays, 14 sick days, and 3 training days from 260 working days leaves only 203 attendance days. Use your own figures from time recording.
If one person operates several machines, allocate their rate proportionally to each machine in the production hourly rate.
Formulas
Labour cost per paid hour = wage · (1 + additional payments) · (1 + payroll on-costs)annual personnel costs = weekly hours · 52 · Labour cost per paid hourattendance hours = (working days − vacation − public holidays − sickness absence − training) · hours per dayProductive hours = attendance hours · billable sharecost rate = annual personnel costs / productive hourscharge-out rate = cost rate · (1 + overhead) · (1 + profit) Sources: REFA methods, hourly workplace costing; Overhead costing according to standard managerial accounting practice (industrial costing)