Utilization rate: Difference between revisions

Revision as of 07:22, 21 July 2021

Revision as of 19:28, 21 July 2021

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In [[business]], the '''utilization rate''' is an important number for firms that charge their time to [[ClientCustomer|clients]] and for those that need to maximize the productive time of their employees. It can reflect the billing [[efficiency]] or the overall productive use of an individual or a firm. Looked at simply, there are two methods to calculate the utilization rate.

The first method calculates the number of [[billable hours]] divided by the number of hours recorded in a particular time period. For example, if 40 hours of time is recorded in a week but only 30 hours of that was billable, the utilization rate would then be 30 / 40 = 75%.

With this method, however, it's easy to see how this utilization rate can be gamed: if a business stops [[Record|recordingrecord]]ing{{dn|date=July 2021}} non-billable time, its utilization rate will always be 100%.

The second way to [[Calculation|calculate]] the utilization rate is to take the number of billable hours and divide by a fixed number of hours per week. For example, if 32 hours of billable time are recorded in a fixed 40-hour week, the utilization rate would then be 32 / 40 = 80%.