Overhead Cost

Add your company cost overhead to make sure it gets included in the profitability reports.

Updated over a week ago

What is Overhead cost?

Overhead cost is the additional cost added on top of your employees' cost rates (salaries) whenever they track time. When people track time, both their cost rate and the overhead amount (per hour) will be deducted from the billable rate. This further increases the accuracy of your profitability reports to account for the facility and internal costs of your organization.

It is recommended not to turn on the Overhead feature until you have at least two to three months worth of data in Productive. Especially important in this regard is consistent time tracking.

Setting up your overhead

If you want to enable overhead on your organization, head to Settings > Overhead cost.

After accessing the Overhead cost, turn on overhead using the toggle in the very top right. Then, you will need to set up the following options: Facility cost, Averaging period, and the Calculation date.

Facility cost
Monthly sum of all of your facility costs such as utilities, software licences, office rent and the like.
Tip: organize your facility costs in different cost groups and items for easier management.

Averaging period

The period that is taken into consideration when calculating the overhead cost projection.

If set to any number of months, the number of months taken into consideration will be the previous month + the number of months in the setting.
Example: if you set it to 1 month, it will take the current month and 1 past month into the equation.

Note: As of January 29, 2024, the averaging period can no longer be set to "No averaging".

Calculation date

The date when the overhead cost is calculated. On this day, the current projection is finalized and it moves into the overhead history. Additionally, the new projection is calculated.

💡 What day should I set as my calculation date?

Ideally, you want all time entries for the previous month to be logged before the calculation. So, set a date by which you expect your team members to have tracked all of their time for the previous month.

The final column, current overhead per hour is the calculated additional cost added to each hour tracked by a person that overhead is applied to. This amount is derived from calculations as outlined below.

How overhead is calculated

Overhead is calculated in two different ways: one for elapsed months (visible under Overhead history), and one for the projection for the current month.

Let's tackle your historic data first.

Overhead history

Overhead is calculated based on the data that you enter into Productive elsewhere.
Specifically, in your time tracking, your expense tracking, and time off bookings.

Clicking on any past month in the Overhead history will display a breakdown of the costs on the right in a popup window.

From there, you can review the elements contributing to your overhead costs and make adjustments by adding or removing items to customize your calculations as needed.

We'll break down each toggle section below!

Facility cost

A lump sum set up manually for each month. This covers all monthly costs associated with the organization's day-to-day operations, like office space, utility bills, equipment added as items in the Facility costs.

Internal costs
1) Time cost: Cost of hours tracked on internal projects.
2) Expense cost: Cost of expenses tracked on internal projects.
3) Time off cost: Cost of paid time off bookings from all people.

4) Overtime cost: The cost of overtime hours (note: reduces overhead).

5) Undertime cost: Refers to the cost associated with undertime hours. These hours represent the difference between the capacity and the actual time spent on tasks or activities logged in the system.

Total hours
This is the sum of time tracked against all budgets (client + internal), plus the time spent on paid time off periods.


Expected number of worked hours. Only people with fixed cost rate type are taken into account here.

Client hours

The total amount of time tracked against client budgets. Only people with overhead turned on are taken into account here.

Internal hours (Internal overhead hours)
Total hours tracked on internal projects. Only people with overhead turned on are taken into account here.

Time off hours (Time off overhead hours)

Total hours tracked on time off. Only people with overhead turned on are taken into account here.

Tip: Toggle any of the above-mentioned costs on or off to include or exclude them from the overhead cost calculation!

Initial cost calculations

Once you have adjusted individual cost groups and decided which ones you want to include in the calculation, the next step is to review your overhead costs per hour.

You can access this information by either clicking on the month you are working on or navigating to the Facility and Internal cost per hour columns in the Overhead history.

Facility cost per hour

Calculated as facility costs divided by total hours.

Internal cost per hour

Calculated as internal costs divided by client hours.

Facility cost per hour = facility costs / total hours
Internal cost per hour = internal costs / client hours

Once these costs have been calculated, they are further averaged. Based on your averaging period, the facility costs / internal costs are averaged across the appropriate number of past facility costs / internal costs.

Final overhead calculation

Once we have calculated our facility cost per hour and our internal cost per hour, the final step is to add these two values together.

This sum will give us our overhead cost per hour.

Overhead cost per hour = facility cost per hour + internal cost per hour

Projection calculation

Projection calculations, unlike historical overheads, take averaging into account. The calculation does not consider whether certain overhead components were on or off in past months. Instead, it calculates the average as if all components had been turned on.

For more context, first, the last value for the facility cost is taken into account, with no averaging taking place. Then, Productive will average the following:

1) internal costs,

2) total hours worked,

3) the number of client hours worked,

4) the number of internal overhead hours, and

5) the number of time off overhead hours.

Note that the calculation only considers the period set up under the Averaging period set above (last month + 1 more month).

Once that is done, we calculate the costs (facility cost per hour, internal cost per hour and total overhead per hour) based on this data.

In the above case, our costs are: 

Facility cost per hour: €1000 / 166h = €6,02

Internal cost per hour: €€6.984,31 / 77h = €90,71

Overhead per hour: €6,02 + €90,71= €96,73

Once this hourly cost has been calculated, it is further averaged based on your historic data and your averaging period.


Why is my overhead so high?

If your overhead is suspiciously high, this is likely because you have very little time tracked, or because you have a disproportionate amount of time tracked against internal projects. Please check your overhead history.

How should I set my averaging period?

There is no one correct answer here. The best guideline is to set the averaging period to coincide with the time that you have decent time tracking in.

If you only started properly tracking time in April, and your March data is not that precise, set the averaging period to include April as the first month.

What is the best way to set my overhead calculation date?

The calculation date needs accurate data for the previous month(s). As such, it is a good idea to have everyone track their time for the previous month before this calculation is done.

Why can't I change my calculation date?

You can't set a calculation date to a day before today's date. Either wait for the day that you are trying to set to be in the past, or place the calculation date in the future.

How do I calculate my facility costs?

Lump together all of your software licences, utilities and other predictable and steady expenditures. Add them all together - these are your facility costs.

I tracked time in the past, can I recalculate overhead values?

You sure can. Head to Settings > Overhead and select the month you need to recalculate the data for. Then select the Recalculate overhead button.

Alternatively, if you make any edits to the calculation, the Save and Recalculate button will appear at the bottom.

Can I recalculate my projection data?

No, recalculating projection data the same way that you would for your historical data is not possible.

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