1. Billable Hours Calculation

2. Administrative Procedure
For units measured in cost per hour or other measures of time, productive time and not total hours available should be used in the cost calculation.
Productive time is the total time available, less non-billable time for vacation, sick leave, holiday, other forms of leave, breaks, equipment downtime, machine repairs, administration time, education/certification and meetings.

3. Calculation
Typically, there are 40 hours in a work week and 52 weeks in a year.
40 × 52 = 2,080 hours in a year
Example: Salary $60,000 per year
Fringe for academic faculty (FY18): 33.5% or $20,100
Total salary and fringe for the year: $80,100

4. Why Billable Hours?
The use of billable hours is to recover your costs through the Recharge Center (ISO) the same as if you were direct charging to a grant.
eg. 50% grant appointment includes:
50% vacation time
50% administration time
50% sick days

5. Billable Hours Calculation
Total salary and fringe of $80,100 divided by 2,080 working hours in a year:
$80,100 ÷ 2,080 = $38.51 per hour
($28.84 / hour salary) ($9.67 / hour fringe)
Simple – all done! Right? Not Quite

6. Billable Hours Calculation
People don’t work all 2,080 hours in a year.
There are holidays, vacation days, sick days and part of each day devoted to training, documentation, administrative or non- productive time.
These hours cannot be directly billed to the customer and therefore the hours cannot be used in the final calculation of billable hours to recover your costs.

7. ? (Repair, Recalibration, Maintenance, Set-up)
Billable Hours Calculation
Full Year Hours Holiday Vacation
Sick Personal Equipment
Training / Staff Meetings Travel
15 Min Breaks Per Policy Other
Total
2080 (52 weeks x 40 hours per week)
- 88 (11 days x 8 hours per day)
- 176 (22 days x 8 hours per day)
- 40 (5 days x 8 hours per day)
-100 (Bereavement, Religious, Medical, Voting, Jury)
? (Repair, Recalibration, Maintenance, Set-up)
-192 (Training, Staff Meetings, Admin. Effort Not Billed)
-96 (Travel Time Between Meetings During Week)
-111 (Two (2) Fifteen Minute Breaks Per Day)
-75 (Any Other Absence Not Noted Above) 1202
Labor Rate = Salary and Fringe / Billable Hours
Salary and fringe
$80,100
Billable Hours
1202
Hourly Rate
$66.64

8. Labor Adjustments Vacation Leave Sick Leave Personal Holiday
University Holiday Calendars
Parental Leave
Family and Medical Leave (FMLA)
Medical Leave
Faculty Development Leaves (includes Sabbaticals)
P&A Professional Development Leaves
Personal Leave of Absence
Bereavement Leave
Religious Holidays
Voting & Election Judge Leave
Jury Duty & Court Appearance Leave
Military Leave
School Conference & Activities Leave

9. Equipment Adjustments
Operator
Can equipment run without operator
Can the operator run multiple equipment at the same time
Maintenance as needed
Maintenance under a service agreement
Repairs
Recalibration
Replacement
Storage time
Set-up time
Seasonality – operation only during the summer or winter

10. Billable Hours Calculation
• You need to recover all of the salary and fringe expenses of $80,100
$38.51 vs $66.64
The worker will only be available to invoice for hours, not 2080
• $38.51 X 1202 billable hours = $46, in revenue
At a rate of $38.51, there will be a deficit of
$33,810.98

11. Billable Hours Calculation
Why should I care? I’ve always used 2080 hours.
If there are 5 people working in this Recharge Center example, the 1150 fund would have a deficit of $169, before the year’s work even begins because they won’t work enough billable hours to recover all of the costs. ($33, X 5 = $169,054.90)

12. EFS Cost Transfer What about transferring costs within EFS?
Salary is based on the 2080 hour-year.
In order to transfer the correct cost, don’t do the Retro adjustment by total hours, but by a percentage of the billable (available) hours

13. EFS Cost Transfer Assume worker only billed out for 900 hours:
• 900/1202 (billable) = 74.87%
900 x $38.51 would transfer $34,659
Unit billed out 900 x $66.64 = $59,976 revenue
UM Report would show a $25,317 surplus
Should be for $59, (74.87% of full salary & fringe)
• ($80,100 x =$59,970.87)

14. EFS Cost Transfer Example:
Employee gets paid for 80 hours in a two-week pay period.
Billable hours should be in the same ratio.
1202/2080 = 57.78%
In an 80 hour pay period, (all other things being equal) the employee would have 46 hours of billable time.
80 x 57.78% = 46.22
Transfer hours at the higher (1202) rate.
46.22 billable hours X $66.64 = $ (80 paid hours x $38.51=$ )

15. EFS Cost Transfer Cont.
$59, in salary expense better matches $59,976 billed out for revenue
Salary expenses would have been $25,317 short by doing HSA on 2080 rate (showing a surplus)
The 5 people in the Recharge Center would total
$126,585 in surplus

16. EFS Cost Transfer Cont.
If the actual “billable” hours were close to 900 rather than 1202, then next year’s rate would be set higher to recover more revenue with less hours.
Base the rate on actual “billable” or “historic hours invoiced” in order to reduce the variances and especially to reduce deficits that could be recovered through a higher rate.

17. Billable Hours Calculation

18. Resources Establishing Internal Sales Rates
Related Policy: Selling Goods and Services to University Departments
Administrative Procedure
Establishing an Internal Sales Accounting Model