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Sunday
May102009

time really is money

Do you know how much your staff really cost? Tighter times are ideal times for taking a stock check of your time inventory - the productive time you have available in your workforce, and its real cost to the business. The answer is not 40 hours per 52 weeks and the cost is not simply a salary divided by this total.

Productive time is paid hours less public holidays, annual leave, probable sick days, and training days and less the breaks people take in a day in order to remain effective. New Zealand has 11 public holidays and 20 days annual leave by law so even generously assuming 7 productive hours per day, that only leaves 1498 hours per person per annum.

The cost of this time then includes the expenses incurred by the business to create these hours. A simple means to estimate this is to apply an overhead multiplier to the person's package (salary, bonus and benefits). The multiplier for consulting companies has traditionally been times two for overheads and times three to include profit targets (note: instances where more accurate figures have been analysed by companies, the multipliers tend to be close to this). So a person paid $100k in total will actually cost $200k/1498=$133.50 per productive hour even without allowance for profit.

Something to be aware of when you estimate the cost of time based processes.