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Underbilling Calculation for Employee Labor: Free Calculator

How Much Could You Be Losing if You Under Charge for Employee Time?
This Free Calculator Helps You Estimate! 

Are You Losing a LOT of Money By Underbilling for Employee Labor?

Let’s do the math:
Here’s a free calculator. If you are under billing for employee labor, use it to discover how much revenue you may lose over 1, 3, and 5 years.

Just enter four numbers in the yellow cells below to show your results.
(I’ve also added examples and other notes below the calculator.)

How to see your results:

  • Enter Your Estimates in the Yellow Cells ONLY. Start with Annual production Hours per Worker. (Entering data in other cells will invalidate the results).
  • To start over, refresh the page. . .
  • If you’re not sure how much you may be undercharging per hour, or you’re not clear about your annual production hours, the examples shown below the calculator may be helpful…

Example: Underbilling Calculation #1:

Every company’s estimates will vary, but here’s a screenshot of what the calculator would show if we entered estimates of:

  • 1,900 hours per year of average “production” time. (2,040 available work hours + overtime, (-) all paid time off, and other ‘non-production’ time such as company meetings, timesheet prep, non-job breaks, and other ‘non-job’ time.)
  • Estimated average underbilling of $5 per production hour.
  • From 5 to 7 revenue-earning (‘production’) employees.

…Results Show a 5-Year Revenue Loss of $237,500 to $332,500!

Calculator-Lost Revenue-$5-5-7 Empl

How to discover the right billing rate for each of your employees


Example: Underbilling Calculation #2:

Changing the variables has a different impact on lost revenue. For this example, we’ve entered estimates of:

  • 1,750 hours per year of “production” time – including overtime. (Many service workers have less time assignable to jobs, so we show fewer annual project hours.)
  • Estimated underbilling of $12 per production hour.
  • From 20 to 25 revenue-earning (‘production’) employees.

= 5-Year Revenue Loss of $2.1 to $2.6 Million!Calculator-Lost Revenue-$12-20-25 Empl


Of course, the numbers get proportionally larger for larger companies with more employees!

What the Underbilling Calculation Reveals…

  1. You may start out with what looks like a fairly small hourly underbilling difference. But, when multiplied by a number of employees over several years, it can amount to a staggering loss of revenue!
  2. This revenue reduction flows directly to your bottom line.
  3. You can imagine that these reductions can ultimately determine a company’s long-term success or failure.

Is There a Possibility That YOU Might Be Underbilling?

If there is a possibility that you might be underbilling, please take a few moments to enter some estimates into the free calculator at the beginning of the article to see the potential impact on YOUR company’s revenue (and bottom line).

If you’re in doubt about “Annual production hours per employee” or “Potential $ per hour of undercharge” (the first two cells in the underbilling calculation), please be sure to consider the following…

Do you know:

  1. Your annual production hours per employee?
  2. What each employee really COSTS per production hour?
  3. How much per hour you SHOULD charge (or build into your project costs) to hit your gross profit goal for employee labor?
  4. Based on those results, how much per hour are you currently underbilling?

Now that you see the huge effect labor under billings can have on your revenue, if you don’t know the answers, click on any of the above links to look at a unique resource we’ve developed to help you determine exactly what those underlying numbers look like for YOUR company. I believe you’ll find these videos and information to be both informative and eye-opening…

Learn more about our construction accounting and manufacturing program classes and discover our job-cost support products!

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