If you want to price projects, there is no getting around having to work out hourly rate figures. We will show you how to roughly work out the internal hourly rate.
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Hourly rates are the basis for any project pricing. Here it’s important to distinguish between the internal hourly rate, which tells you how much an employee costs per hour internally, and the external hourly rate. The external hourly rate is the price the customer will have to pay per hour for the service in question. These two questions are key here: 1. How much does it cost my company to do this work? and 2. What profit do we want to make from this work?
In this article, we will be focusing on the first question, and on working out the “internal hourly rate”. So in effect what we want to find out is how much our employees cost per hour, and we will be using a practical calculation method to do this:
Full costs comprise salary costs, incidental wage costs and other ancillary costs incurred for each employee. More specifically, these are:
Effective working hours tell you how many billable hours are actually worked by employees. It’s based on the following calculation:
