Labour Cost & Capacity
Translate paid hours into delivery capacity and use realistic billable time when pricing work.
topicStart with the decision
Paid time, available time and billable time measure different things. Using them interchangeably can make a quote look profitable or a schedule look achievable when it is not.
Calculate the hourly cost
Allow for employer costs and time that cannot be sold.
Check available capacity
Separate a task estimate from how much work a team can deliver.
Test staffing needs
Compare the workload with available crew hours.
Return to the quote
Use the labour cost once, with an explicit overhead allowance.
Questions this topic covers
Should I divide costs by paid or billable hours?How do I allow for uncertain job duration?When is hiring cheaper than overtime?Why did this job cost more than estimated?Is utilisation the same as productivity?Examples use hypothetical figures with checked arithmetic. Read the methods and limits.
Guides and examples
How to review estimated versus actual job costs
Separate hours, rate and material variances, reconcile the change in profit and use the findings to improve your next estimate.
Labour cost per hour: paid hours vs billable hours
Calculate labour cost using paid hours and billable hours, then separate employer costs from overhead to avoid underpricing or double counting.
Overtime or another employee: compare cost and usable capacity
Compare overtime with hiring at the hours you can actually use, including onboarding, skills and the duration of demand.
Service capacity planning: turn available hours into deliverable jobs
Estimate practical team capacity, allow for non-delivery time and test longer jobs before committing to a weekly workload.
