Report #: Q0025

The goal of a profitable Systems Integration or related company is to proactively forecast, schedule, assign and track direct labor efforts accurately to maximize productive time against the labor pool’s capacity.  This labor pool is often comprised of numerous types of labor (hourly and salaried), which expends their effort on different types of activities: Sales, Projects (Design and Integration), Service and Internal projects.  These activities can generate revenue or be an investment to create greater revenue and profits.

There is a distinction between Utilization in general and Chargeability (Billable Utilization) – and although they are often used synonymously they are different:

• Utilization is a measure of the individual’s capacity and availability to perform work based upon a typically 40-hour week. Calculated by taking the number of billable and indirect hours divided by a fixed number of hours per week
• • Example – John is an hourly employee and works a 40 hour week. He logged 30 hours as direct labor which was billable, 5 hours which were indirect, and 5 hours of sick time. His utilization is 35/35 or 100%.
  • Example – John is an hourly employee and works a 50 hour week, 10 of which is overtime. He logged 45 hours as direct labor which was billable. His utilization is 50/40 or 125%.
  • Example – John is a salaried employee and works a 44 hour week. He logged 40 hours as direct labor which was billable, and 4 hours of indirect.  His utilization is 44/40 or 110%.
• Billable or Chargeability (Direct Labor) is the amount of Direct Labor Hours divided by the Total Labor Hours. Direct Labor is able to be billed against a project job number or Service / Maintenance agreement.
• • Example – John is an hourly employee and works a 40 hour week. He logged 30 hours as direct labor which was billable, 5 hours which were indirect, and 5 hours of sick time. His chargeability is 30/35 or 86%.
  • Example – John is an hourly employee and works a 50 hour week, 10 of which is overtime. He logged 45 hours as direct labor which was billable.  His chargeability is 45/50 or 90%.
  • Example – John is a salaried employee and works a 44 hour week.  He logged 40 hours as direct labor which was billable, and 4 hours of indirect.  His chargeability is 40/40 or 100%.
• The Employee Utilization report is a lagging report (based on posted Time Bills) that displays labor utilization against availability by employee or type of labor over a period of time. This is typically used on a monthly basis as part of Management reporting and is often measured against goals and targets.  The individual Labor Types may have different utilization targets:  a Technician may have a billable utilization target of 90%, an Engineer who also contributes to Sales / Estimation may have a target of 50%, a Project Manager may have a target of 75%.

• The report shows:

• • AVAILABLE:  the capacity of the individual based on their HR calendar (~8 hours / day) excluding holidays, vacation and sick time
  • BOOKPERCENT: the percentage of the total billed hours against the available hours
  • TOTALBILLED:  the number of hours tracked and posted into Q360 and typically the number of hours billed to a revenue generating task
  • BILLPERCENT:  the percentage of the direct hours against the available hours
  • BILLABLE:  Typically equals the TOTALBILLED, since most companies are only tracking BILLABLE time against projects
  • NONBILLABLE:  not typically used in the current framework.  The number of hours calculated by subtracting Available from Time-billed plus Admin Time.  When Available and Time-billed are equal, Admin Time and Non-billable will also be equal.  When Timebilled is greater than Available, Non-billable is less than Admin.  Depending on the number of hours Time-billed vs. Available, Non-billable could be a negative number.
  • ADMIN:  time tracked against internal meetings, training, etc.
• Note: many organizations do not track Admin or non-billable time, so the assumption is often that all time tracked is billable to a project. Be aware of how this may impact your employee utilization data.

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