How to calculate utilization rate
Utilization compares the hours a person spends on work a client pays for with the hours the company pays them for:
- Utilization rate = billable hours ÷ paid hours × 100
Take the defaults in the calculator above. A person is paid for 160 hours a month and 104 of them are billable, so utilization is 104 ÷ 160 = 65%.
The calculator works in any currency and needs no sign-up. Nothing you type leaves the page.
Paid hours or available hours?
There are two common ways to set the bottom of the fraction. Paid hours include holidays, leave and sick days. Available hours leave them out, so the same month shows a higher rate. Neither is wrong; what matters is using one of them every month and saying which.
For pricing, paid hours are the safer choice: salaries are paid for leave too, and a rate built on available hours hides that cost. The hourly rate calculator uses paid hours for the same reason.
What the gap to a target is worth
With a 75% target, the same person should bill 160 × 0.75 = 120 hours. They billed 104, so the gap is 16 hours. At a billable rate of 45, that is 16 × 45 = 720 a month for one person. For a team of 6 people in the same position it is 4,320 a month, or 51,840 a year.
The same gap also changes what each billable hour must earn. If one person costs the company 4,100 a month, every billable hour has to bring in 4,100 ÷ 104 = 39.42 to cover that cost; at 120 billable hours it would be 4,100 ÷ 120 = 34.17. What an hour of your team actually costs walks through that arithmetic.
Setting a realistic target
There is no single right number. It depends on the role and on how much of the week goes to things no client pays for: sales, hiring, internal projects, training and running the company. Owners and managers usually bill less than the people doing the work, and that is expected.
A useful way to set a target is to work backwards: the rate you can charge, the cost of each person and the margin you need give you the billable hours the company needs. Then check whether that number is plausible for each role. A target above 100% is not a target; it is overtime.
Measure it from approved hours
A utilization rate is only as good as the hours behind it. If hours are filled in from memory on Friday, the rate reflects memory. Rates built on reviewed, approved hours are the ones worth pricing from. Utilization rate: how to measure it without fooling yourself covers the common traps, such as counting internal meetings as billable or leaving leave out of the paid hours.
If your team still records time in spreadsheets, the free timesheet template keeps billable and non-billable hours apart from the start.
From a calculator to the real rate
In PLYNTUM, people record time against tasks that belong to a project and a client, on every plan. From the Core plan, managers approve timesheets, and approved hours become project cost at each person’s loaded hourly cost, which only leadership sees. That gives you utilization from the same approved records that set project cost, rather than from a separate spreadsheet.
PLYNTUM does not capture time automatically today; private desktop time capture is in development. It is not payroll software either. See how time tracking works or the plans and prices.