In Productive, the calculation of hourly costs is adjusted based on the actual number of working days in a given month.
This adjustment is important because the number of working days can vary due to differences in month length, starting days, and holidays.
Find out more about setting up cost rates in this article.
How Does the Calculation Work?
For employees with "fixed" cost types (weekly, bi-weekly, monthly, or annual cost types; salaries), Productive divides their total cost by the exact working capacity for the month.
Here’s how this is done:
Precise Working Capacity
Productive considers the exact number of working hours in each month, avoiding assumptions like "4 weeks per month" (since a month typically has 4.33 weeks).Holiday Adjustments
Public holidays or other non-working days reduce the total capacity, leading to slight variations in hourly costs month-to-month.Accurate Annual Calculations
Productive takes the cumulative working days into account, ensuring that hourly rates stay consistent and reflect the actual number of hours available for work.
Why hourly cost doesn’t change during time off
Hourly cost does not increase when an employee takes vacation or other personal time off. Productive calculates hourly cost from the employee’s capacity for the cost-rate period, and time off reduces availability, not capacity.
📌 Example
An employee with a $60,000 annual salary and a full-year capacity of 2,064 hours has an hourly cost of:
$60,000 ÷ 2,064h = $29.07/hr.
Even if they take three weeks of vacation, the hourly cost remains $29.07/hr.
👉 Learn more about the difference between capacity and availability here.
Why the capacity shown on the cost rate might look different
The capacity shown on the cost-rate screen reflects only the hours from the cost-rate start date to the end of that cost-rate period (for example, the end of the year, month, week, or 2-week period, depending on the cost rate type). This partial capacity is shown for display purposes only.
However, Productive always uses the employee’s full-year capacity when calculating their hourly cost, so the number on the cost-rate screen will often be lower than the actual capacity used in the calculation.
📌 Example
If the same employee’s salary changes on April 1, the cost-rate screen might show a capacity of 1,552 hours (April → end of year). You might expect the hourly cost to be:
$60,000 ÷ 1,552h = $38.66/hr.
But Productive instead uses the employee’s full-year capacity of 2,064 hours, so the correct hourly cost remains:
$60,000 ÷ 2,064h = $29.07/hr.
Logic behind it: Productive uses the full-year capacity for calculating hourly cost so that short periods (like starting a salary in the middle or later in the year) don’t make the hourly rate look unrealistically high.
Viewing Hourly Cost Changes
To see how hourly costs change over time:
Go to the employee's profile in Productive (Resourcing > Employees).
Open the Cost Rates tab.
Review the historical data in the expandable table, which shows how hourly rates have fluctuated based on monthly variations in working capacity.
This table is especially useful for monitoring trends and making informed financial decisions.
