Let’s Start By Calculating Your Full-Time Employee’s Actual Hourly Rate!

Universally Accepted Productivity Rates:

• Freelance Developer = 96%-98%
• Consultant Developer= 96%-98%
• Full-Time Employee – Developer = 74% to 81%
• Full-Time Employee – Base = 37% to 47%

It is important to remember that corporate required training, events, seminars, expectations, oversight, and other factors take away from actual work and lower the productivity rate of a full-time employee, while an outsourced freelance and consulting resource’s hourly rate is based on a much higher productive rate per hour due to the nature of their position and expectations (typical rates listed above).

FTE = Full Time Employee

PHR is the rate that you should use when determining (a) what you are actually paying your employee for work accomplished, and (b) the number you should use to determine cost of project development, and when comparing an outside resource bid.
 

DEFINITIONS:

Base Salary

Base salary is the paid to an employee, not including any benefits, bonuses, overhead, G&A or raises.

Direct Expenses

These are the expenses related to the employees base salary paid by the company that go beyond the base salary but should be included. Direct expenses include:

• FICA & Unemployement = 9.5%
• Medical Insurance = 7.1%
• Dental & Other Incidentals = 1.5%
• Retirement 401k Match = 3.5%
• Bonus = 6.8%

NOTE: If your calculations are different then these, feel free to enter in 0% to 100% depending upon your company’s rates. For Example: – if your “bonus = 15%” and your “401k match = 6%” then together they equal 21%. Next, subtract our number of 10.3% from your number of 21% and add the difference to our preloaded number of 28% (28% + 10.7% = 38.7% for direct expenses rate) .

Indirect Expenses

When determining what a workflow actually costs, or comparing apples to apples between full-time vs. outsourcing (consultants have these figures included in their hourly rate), these are the expenses that are often forgotten as required costs of doing business and having an employee on staff. Indirect expenses include:

• CEO
• CFO
• HR & Recruiting
• Finance Department
• Marketing
• Sales
• IT

• Hardware
• Software
• Lincense/Fees
• Support



• Infrastructure

• Mortgage & Interest
• Property Taxes
• Utilitiess
• Office Furnature
• Facilities Expenses


• Supplies & More

NOTE: If your calculations are different then these, feel free to change the percentage to fit your company’s overhead & G&A. For Example: According to a 2018 Deltek survey (source) that included 638 respondents, in companies listed as Small (under $20 million), Medium ($20 to $99 million) and Large (over $100 million), and included over 90 questions, found the average indirect expenses for the different company sizes came in at: Small Business = 56%, Medium Businesses = 57%, and Large Businesses = 48%

Actual Salary

Base Salary plus direct and indirect expense determine “Actual Salary.

Based on 2080 hours in a year (260 work days x 8 hours each day) — Minus 168 hours for paid vacation (21 days) — Minus 64 hours paid holidays and (8 paid holidays) = 1,848 — Adjust to fit each employee’s specifics.

Calculated Base Hourly Rate

“Actual Salary” divided by “Maximum Hours Available.” based on 100% productivity

Estimated Daily Productivity

(See above notes)

Employees Productive Hourly Rate

Outsourced resources tend to be at a 96% to 98% productive rate due to the nature of their role. Full Time Employees (FTE), based on multiple research articles and data, tend to run between 37% and 78% productive within an 8-hour work day, depending upon their job description. THIS IS THE NUMBER TO USE WHEN COMPARING OUTSOURCED RESOURCES HOURLY RATES & ESTIMATES because their rates include all direct and indirect expenses.