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.
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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.
In addition to setting up a personal labor cost for each of your team members, you can set up role-level labor cost.
Later, you will be able to use the role rates to estimate project delivery costs when compiling a quote.
Role-level labor cost is also the fallback option if individual labor cost is missing. In other words – if you haven’t set an individual labor cost for a team member, Scoro will use the role-level labor cost as the default one for all cost calculations. The Default labor cost itself is the very last fallback – this one is used only if there is no individual or role-level labor cost defined.
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.