What Is Overhead Cost?
A person's cost rate is what an hour of their time costs you, based on their salary. But an hour of work costs more than the salary alone. Rent, software, and the time your team spends on internal work all have to be paid for too.
Overhead cost adds a share of those costs to every hour your people track. Your profitability reports then show what a project really costs, not just what you pay in salaries.
Adding overhead cost is available on the Ultimate subscription plan.
Where to Start
Most organizations follow these steps in order. Skip step 5 if you don't have subsidiaries.
Check that the Overhead checkbox is turned on in your people's cost rates. See Understanding and Setting Up Cost Rates in Productive.
When you have two to three months of tracked time, turn on overhead cost and set your facility cost, averaging period, and calculation date. The steps are in Setting Up Overhead Cost.
After your first calculation date, review the result in Overhead history. See How Overhead Cost Is Calculated.
Open any month, past or current, to see its breakdown and choose which components count toward overhead. See Review and Adjust Overhead Cost by Month.
If you have subsidiaries, choose how hours are counted. See Overhead Cost per Subsidiary.
What Overhead Cost Includes
Productive calculates two amounts for every hour tracked:
Facility cost per hour: Your monthly facility costs, such as office rent, utilities, and software licences
Internal cost per hour: The cost of time, expenses, and absences on internal work
Together they make the Overhead cost per hour. In profitability reports, Productive deducts the person's cost rate and this overhead amount from the billable rate.
đ See the formulas in How Overhead Cost Is Calculated.
Client and Internal Budgets
Once the overhead cost per hour is calculated, Productive adds part of it to the person's cost whenever they track time. What gets added depends on the budget type.
Internal Budgets
When people track time on an internal budget, the Facility cost per hour is added to their cost. If someone's cost is $100 per hour, an hour on an internal budget costs $110.
Internal time already feeds the internal cost calculation, so adding the internal cost per hour again would count it twice.
Client Budgets
When people track time on a client budget, the full Overhead cost per hour is added to their cost. With the same $100 per hour, an hour on a client budget costs $140.
Who Overhead Applies To
Overhead only applies to people who have the Overhead checkbox turned on in their active cost rate. Leave it unchecked for anyone who shouldn't carry overhead.
đ Learn more in Understanding and Setting Up Cost Rates in Productive.
Overhead Cost per Subsidiary
If your organization has multiple subsidiaries, you can calculate overhead separately for each one. You can count hours by the budget they were tracked on, or by the person who tracked them.
đ Learn how in Overhead Cost per Subsidiary.
