Calculate and set staff cost rates in Projects
Calculate your staff’s cost per hour/hourly rate for job costing in Projects.
A staff cost rate is how much a staff member costs your business per hour. Once you set a cost rate for a staff member, it displays on the Project Detail report and is used to calculate the actual cost and overall profitability of a project (invoiced amount minus the cost).
Calculate a staff member's cost rate
One way to determine a staff member’s cost rate is to start with their hourly rate, then add additional costs, such as:
- Overhead (office space, equipment, internet)
- Any other costs related to the employment of that staff member
Some common methods of calculating staff cost rates are:
- Pay per hour
- Pay per hour + allocation of overhead per staff member
- Setting a tiered rate per staff level, such as Junior, Intermediate, or Senior levels
- A blended rate used for all staff (total salary/wage costs plus total overheads, divided by total employees)
In some industries it's common practice to use a charge out rate instead of a cost rate. Typically a charge out rate will have a profit percentage built in on top of the cost as calculated above. If you're using a charge out rate, you want the total cost versus the amount invoiced to break even. If you're using cost rate, you want a profit margin to show on each project.
Talk to your accountant or bookkeeper if you're not sure how to calculate the most appropriate cost rate for your staff. If you don’t have an account or bookkeeper, you can look for one in the Xero Advisor Directory (xero.com).
Set the cost rate for a staff member
In the Projects menu, select Overview.
Click the menu icon then select Project settings. This shows all staff enabled for Projects.
- Click the pencil icon next to the staff member you want to set a cost rate for.
- Enter the cost rate per hour, then click Save.