6. The True Cost of Your Employees & Why Productivity Matters
Ever sat down with a calculator and thought, “If I’m charging $65/hour, why am I not swimming in profit?” Here’s the kicker: it’s not what you think you’re paying—it’s what you’re really paying.
The Real Cost of an Employee
When you pay an employee $35/hour, their true cost, considering KiwiSaver, ACC, leave and other add-ons, jumps up 23% to $43.72/hour. But that’s just the start!
Impact of Non-Billable Time on Your Bottom Line
No one’s productive 100% of the time. Think about meetings, training, or just those days when things don’t go to plan. When you're charging out at $65/hour, and employees are costing $43/hour then even losing 1 hour a day (5 hours of non-billable time in a week) means:
- Expected Revenue: $2,600
- Actual Revenue: $2,275
- Actual Margin: $526
- Margin per Hour: $13.15 😬
That’s a huge difference when you multiply it across the month or year. And it’s why focusing on productivity is key. Less wasted time = higher margins.
So, What Can You Do?
- Track Non-Billable Time: Understand where time is leaking away.
- Increase Billable Hours: Look at ways to reduce admin, disorganisation, and non-essential tasks.
- Review Charge-Out Rates: Make sure your rates reflect the true costs and margins you need.
Pro Tip: Use a tool like our Onsite Insight Employee Cost Calculator to get a clearer picture of what each staff member truly costs.
The Bottom Line
Productivity and the true cost of employees go hand in hand. If you’re not keeping an eye on both, your margins will take a hit. So, are you getting the most out of your team?
Download the Excel calculator here and run the numbers for your team