Edition: Professional, Business, Enterprise
User-level: Director, System Administrator
Previous steps: Financial controls
Set up actual cost based on staff's cost per hour or salary package. Accurately report on actual cost of time spent by the hour.
Professional Edition
Define the cost per hour or based on annual salary package or hourly cost.
Professional level - Update the staff cost
Open a staff record.
Open the Employee menu > Staff financials > Cost.
Click 'Add Staff cost' and select the salary type.
Type the cost for the staff member per hour into the 'set cost' field.
Set the 'effective from' date for when this rate will start from.
Save.
Professional - Set cost calculations
The actual cost and charge value for the Synergy Professional product is based on the 'set cost' value entered against the staff member. This is the value the staff member is paid per hour.
Details for Professional level
Staff type - At the Professional product level the only option in this drop-down is 'set cost'. This allows you to define the staff members cost per hour.
Set cost - This field is only shown when the 'set cost' type is selected. Enter the cost of this staff member per hour.
Effective from date - Type the date that the cost will take effect from. This defaults to today's date, click into the field to select another date from the drop-down calendar.
Business or Enterprise Edition
Business or Enterprise - Update the staff cost
Enter the staff annual package, annual salary, or hourly pay rate.
The actual cost is calculated using the total number of hours worked in a year and the total availability of the staff member.
The target utilisation on the staff record tracks the amount of time that will be utilised towards billable project tasks. The utilisation is used to determine the target charge out value for the staff member.
Open a Staff record.
Open the Employee menu > Staff financials > Cost.
Click 'Add Staff cost' and select the salary type.
Select how the salary will be calculated:
Annual package
Annual salary
Pay rate per hour
(Optional) Check the values for extras, superannuation %, hours per year, availability %, overhead adjustment, and target utilization. Update if required.
Save.
Actual cost and target charge calculations
The target charge value is the recommended ($) amount that a staff member should be billed out at per hour, to meet the business' profitability requirements (defined in financial controls).
The actual cost is based on the salary cost details for the staff member, and the operating costs for the organization. This is based on the below factors:
Gross income - is made up of the salary amount per year. You can also add annual extras, and superannuation/pension fund contributions to this.
Overhead rate - is setup in financial controls for the organization (e.g. ranging from 1.5 - 2.5).
Overhead adjustment - is applied if the staff member works from home or from a regional office that is cheaper to run than the head office.
Target profit % - is setup in the financial controls for the organization (e.g. 15%)
Actual Cost Calculations
The actual cost is based on the salary for the staff member, and the operating costs for the organisation. This can be considered as the breakeven cost per hour for the staff member:
Salary / (availability * hours) = adjusted cost
Adjusted cost * overhead factor = actual cost
To additionally factor in the profit margin, the final step to work out the target-charge is:
Actual cost * target margin % = target charge out
Example
The annual package for David is $80,000. This includes any extras and super / pension fund contributions.
David's staff record has been setup to show he works 1976 hours per year, and has an availability of 80% after leave is taken into account. The organization has an overhead rate of 2, and a target profit of 20%.
Using the above details David's actual cost is calculated as:
Hours (1976) x availability (0.80) = 1580.80 hours.
Salary package ($80,000) / 1580.80 hours = $50.61 adjusted cost per hour.
Adjusted cost ($50.61) x overhead rate for the organization (2) = $101.22 actual cost per hour.
Actual cost ($101.22) x target profit (25% as 1.25) = $126.56 target charge value.
Details available for Business or Enterprise levels
Staff type - Select type of staff member: Salary, part-time, set cost, or contractor.
Effective from date - Type the date that the costs will take effect from. This defaults to today's date, click into the field to select another date from the drop-down calendar.
Set cost - This field is only shown when the 'set cost' type is selected. Enter the cost of this staff member per hour.
Calculate by options - Select if the staff member has an annual package (salary + super + extras) or an annual salary (base salary excluding super) or a pay rate per hour (hourly rate excluding super). Available for salary, wages, part-time, casual, or contractor types (no set cost).
Cost settings (Optional - click the drop-down to view):
Note: Cost settings are region-specific therefore any settings that may not be relevant to your region will not be included:
Extras - Enter the value for any extras paid on top of the salary, such as car, mobile phone, internet etc. If the annual package is used as the calculation method when you type an extras value it is used to re-calculate the fields annual salary and pay rate per hour, and super total.
Superannuation - The percentage of the annual package that will be paid into the staff members superannuation fund. This is also known as a pension fund, 401K, and Kiwi Saver (e.g. specific to Australia and New Zealand). This is normally a government-regulated percentage that each salaried person must contribute to their retirement savings. This value defaults from the financial controls.
Super total -The total value that will be paid per year into the superannuation or retirement fund.
Hours per year - Value defaults from financial controls. This is the number of hours the staff member could work per year if they didn't take any leave. For example, 8 hours per day, 5 days a week is 2080 hours per year. Update this value for a staff member to more accurately work out a base hourly cost value.
Availability - Value defaults from financial controls. This is the percentage of the year that the staff member is available to work. Availability takes into account that out of the 52 weeks in the year that staff may only work for 43 weeks after taking holidays and medical leave. Update this value for a staff member to more accurately work out a base hourly cost value.
Adjusted cost - The adjusted cost is the cost for the staff member before any costs for running the office they are located in are applied. The calculation can be referenced as above under 'Actual cost calculations'.
Overhead rate - Value from financial controls. The overhead factor is the cost of running office where the staff member work, and is set to cover the office costs when calculating actual cost and profit in Synergy.
Overhead adjustment - The overhead defaults to 100%. Update this percentage to mark up / down the overhead cost for a staff member. This can be required when a staff member works from home, or from a remote office which does not cost as much to keep them employed as a staff member working in the primary office location.
If the staff member works in the primary office location this figure is expected to be left at the default value of 100%. e.g. Update the overhead adjustment value to 80% and the actual overhead cost for the employee is discounted by 20%. When the overhead cost is reduced the actual cost charge-out rate is then also reduced for that staff member.
Actual cost - The actual cost for the staff member after the costs of running the office location is applied. The calculation for this can be referred to above.
Target utilization - Nominate a percentage value of how much time the staff member is working on project billable tasks. Value defaults from financial controls.
Target profit - A percentage % added above the overhead factor to determine target profitability levels. This will add the % margin above the break-even overhead rate to determine the target charge value for staff. Value defaults come from financial controls.
Target margin - A percentage % added above the overhead factor to determine target profitability levels. This will add the % margin above the break-even overhead rate to determine the target charge value for staff. Value from financial controls.
Target charge - The staff minimum charge value. The lowest value that this person should be charged out at on a project if the other business overheads and target profits are to be met. The calculation can be referenced as above under 'Actual cost calculations',
Where to next?
What other features does this relate to?