Glossary

Cost per productive hour

Total annual employment cost divided by the hours actually worked, rather than the hours contracted.

A full-time year contains about 2,080 contracted hours, but holidays, vacation and sick days are paid without being worked. Dividing the loaded annual cost by contracted hours therefore understates what an hour of delivered work costs, typically by eight to twelve percent. The productive-hour figure is the one to price a job from, and the gap between the two is exactly the size of the paid time off. Unbilled working time — travel, quoting, rework — narrows the useful hours further, and no calculator can see it.

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