As labor is likely your biggest cost, it’s crucial to factor it in when evaluating the profitability and delivery efficiency of different projects. You can set up the hourly labor cost for each team member in Scoro and later use this data when evaluating project success to truly understand what helps your business thrive and what eats into your margins. Follow along this article to learn how to calculate labor cost and add it to your site.
Calculate labor cost
Labor cost refers to the total expenses employers incur during the employment period of each employee.
To calculate the hourly labor cost for any team member, consider their annual payroll, training fees, and other direct expenses like work equipment.
Next, divide this sum by their total working hours in a year, including vacations and nonbillable hours. For a full-time employee, the formula is 40 hours per week X 52 weeks in a year, resulting in about 2080 hours annually. This will give you an accurate estimate of their hourly labor cost.
Add labor cost to Scoro
To enable the hourly labor cost feature in Scoro, go to Settings > Work and projects > Labor cost. You can click on a user's name to adjust their labor cost from there. If a team member is due for a promotion, you can schedule an increase in their labor cost from a specific date.
We also recommend setting the default labor cost. This is used to calculate project delivery cost for the activities delivered by users with no individual labor cost set up in Scoro.
If you've enabled Roles for your Scoro site, the labor cost page will look slightly different. In addition to individual and default labor costs, you will be able to add role-based rates.
Later you will be able to use the role rates to estimate project delivery costs when compiling a quote.
However, don't leave the user-based fields blank even if you add the labor cost at a role level. Filling in individual rates is crucial as Scoro uses the Default (not role-based rate) to track project financial performance whenever the individual labor cost is missing.
You've now learned how to add hourly labor cost for each employee in Scoro to ensure accurate data on the internal project delivery costs. In the next step, you'll be able to determine the best approach for pricing your services in Scoro.