Calculate Charge-Out Rate Utilisation: The Real Arithmetic

To calculate charge-out rate utilisation, stop dividing by 2,080. Take the fully loaded wage cost of a field employee (gross pay plus employer on-costs, holiday pay and pension), then divide it by the hours that person actually bills — not the hours they are paid for. An electrician on £38,000 gross costs roughly £43,900 loaded and is available for about 1,776 hours a year after holiday, sickness and training. At 60% utilisation that is 1,066 billable hours, so break-even labour is £41 an hour — nearly double the £21 you get from the lazy 2,080 sum. Utilisation, not wages, is what sets your rate.

The three hour numbers most firms confuse

Almost every bad rate calculation comes from mixing these up. Keep them separate on paper before you touch a calculator.

• Paid hours — everything you pay for. 52 weeks x 40 hours = 2,080. This number is useless as a divisor. Nobody bills a customer for their annual leave.
• Attended hours — paid hours minus holiday, bank holidays, sickness, training and toolbox talks. For a UK employee on statutory 28 days leave (224 hours), plus about 5 sick days (40 hours) and 5 days of training and certification (40 hours), that is 1,776 hours. Sweden has the same shape: 25 days semester plus red days lands in the same 1,750–1,800 range.
• Billable hours — attended hours that end up as a line on a customer invoice. This is the only divisor that tells the truth.

Utilisation (Swedish firms call it debiteringsgrad) is billable hours divided by attended hours. If a fitter attends 1,776 hours and 1,066 of them reach an invoice, utilisation is 60%.

Step 1: get the loaded wage cost right

Gross salary is maybe 70% of what an employee costs you. Build the number properly, once, per person.

UK example. Gross £38,000. Employer National Insurance at 15% on earnings above the £5,000 secondary threshold adds £4,950. Auto-enrolment pension at 3% of qualifying earnings adds roughly £950. Loaded cost: £43,900, about 1.16x gross. Check the current NI rate and thresholds with HMRC before you commit — they move, and they moved recently.

Swedish example. A monthly wage of 38,000 kr is 456,000 kr a year. Add arbetsgivaravgifter (31.42% for a standard-age employee at the time of writing — verify the current rate at Skatteverket), plus collective-agreement pension and insurance of roughly 5–6%. The loaded cost lands near 640,000 kr, about 1.4x the wage. Swedish on-costs are heavier than UK ones, which is exactly why the multiplier has to be measured and not assumed.

Do not put the van, the phone, the office or your own wage in here. Those are overhead, and they get their own line in Step 3. Mixing them in now is how people double-count and then wonder why their quotes lose.

Step 2: divide by billable hours, and watch the rate move

Here is the whole point of the exercise, in one table. Loaded wage cost £43,900. Attended hours 1,776. Break-even labour cost per billable hour:

Read the 60% row again. A firm running a perfectly ordinary utilisation rate needs almost exactly twice the hourly recovery the naive calculation suggests, before a single pound of overhead or profit. That gap is where small trades firms quietly go broke while feeling busy.

Notice how the curve steepens. Going from 85% to 75% costs you £4 an hour. Going from 60% to 50% costs you £8. The lower your utilisation, the more brutally each lost hour is punished.

Step 3: add overhead, then margin (and divide, do not multiply)

Overhead is everything that is not field wages: van lease and fuel, insurance, tools and test gear, phone, software, accountant, rent, and the share of your own time spent on the business rather than on the tools. Total it for the year and divide by the number of billable field people.

Say that comes to £15,000 per field person. At 60% utilisation that is £15,000 / 1,066 = £14 per billable hour. Your cost to serve is £41 + £14 = £55.

Now margin. If you want 15% net margin you do not multiply by 1.15. You divide by 0.85, because margin is a percentage of the price, not of the cost. £55 / 0.85 = £65 an hour. Multiplying by 1.15 gives £63 and quietly delivers 13% instead of 15%. A small error that compounds across every job you sell.

These are illustrative figures built from a stated wage and a stated overhead. They are not a benchmark and not research. Put your own two numbers in; the shape of the curve will not change, only the labels.

How to measure real utilisation from time-clock data

Most firms guess their utilisation, and they guess high. Here is how to read it instead of feeling it. You need three totals per person per week, and a clock that records job codes:

1. Attended hours — clock-in to clock-out, minus unpaid breaks.
2. Job-coded hours — hours stamped against a specific job number.
3. Invoiced hours — hours that appear on, or are recovered by, a customer invoice.

Utilisation = invoiced hours / attended hours. The gap between job-coded and invoiced hours is your recovery rate, and it is usually the more painful number. Time can be booked to a job and still never billed: an overrun on a fixed price, a warranty return, a second trip because the part was wrong.

For fixed-price work, convert rather than skip. Divide the labour portion of the sold price by the hours clocked to that job. Sell £900 of labour, clock 18 hours, and your effective recovery is £50 an hour. Compare that to the £65 the table says you need, and you have your answer about that job.

Code the non-billable time honestly. Use a short, fixed list so it stays comparable week to week: travel, quoting and surveys, materials collection, rework and warranty, yard and vehicle, training, admin, waiting on site. If everything non-billable falls into one bucket called "other", you have measured nothing you can act on.

What a geofenced time clock changes

A paper timesheet filled in on Friday is a memory, not a measurement, and memory rounds in the employee's favour. A geofenced clock that starts when the van reaches site and forces a job code at clock-in gives you travel and on-site time as separate, dated facts. That is what turns utilisation into a weekly number you read rather than an annual number you argue about. In OdinTask the time clock feeds the same job records as the planner and the invoice, so attended, job-coded and invoiced hours come from one place instead of three spreadsheets that disagree.

One Swedish clarification, because it trips people up: personalliggare (the electronic staff ledger required on many construction sites) and ID06 are compliance tools for Skatteverket and site access. They are not utilisation data. They record who was present, not what was billable. Do not run your pricing off them.

Reading the number without fooling yourself

• Measure per person, not per firm. An owner who is half on the tools and an apprentice on supervised work will drag a company average into meaninglessness. Blend the rates deliberately, at the end, on purpose.
• Use a rolling 13 weeks. One quiet week is weather. A quarter is a trend.
• Do not chase 100%. Above roughly 85% you are almost certainly billing travel nobody agreed to, or skipping the quoting that fills next month. Utilisation climbing while the quote pipeline empties is a warning, not a win.
• Raise the rate or raise the utilisation — decide which. Moving from 60% to 70% on the same wage and overhead cuts your cost to serve from £55 to £47. That is a 15% price cut you can hand a customer without losing a penny, or a 15% margin gain you keep. Same lever, your choice.
• Re-run it when anything moves. A pay rise, a new van, an extra apprentice or a quiet quarter all shift the answer. Once a year is the minimum; once a quarter is better.

Do this today

Take one employee. Write down their loaded cost. Pull last quarter's clock data and total attended, job-coded and invoiced hours. Divide. Compare the answer to the rate on your last three quotes. If the arithmetic says £65 and your quotes say £48, you now know exactly why the bank balance never matches how hard everyone is working.

If your time is still on paper, that arithmetic is guesswork. Start a free trial of OdinTask and get the clock, the planner and the invoice reading from the same job — see the pricing page for what it costs.