Just wanted to check on the general feeling for payroll and overhead recovery rates for a small practice
For instance if i employ a helper at £30k per annum all direct costs included should i then aim for:
Their pay £30k
Overheads £30k
profit £30k
Billed hours £90k
ex vat
This looks very nice but suspect the profit and overhead elements will be a lot less in reality.
Maybe
Their pay £30k
Overheads £10k
Profit £10k
Billed ex vat £50k
Thank you
Replies (3)
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Key things you're missing IMHO:
1) the employee won't solely be doing chargeable work.
2) you won't always get 100+% recoveries.
"Overheads" is not necessarily just for things like rent/electricity etc, but also reflects the fact that you still need to pay the employee their salary even when they're doing admin stuff or on holiday, neither of which can be charged to the client. Similarly if a job goes over budget, you often can't bill the excess to the client.
...but then I haven't used a charge our rate since my last employed role ~6 years ago...and back then my charge out rate was 6-7 times my salary by my back of fag packet calculations.
double gross in Ks
When I worked in practice, over 4 different practices, my charge out rate was typically "double" my gross salary (in £0,000) so when I was on gross of £20k, my charge out rate was £40 per hour.
I would say an employee needs to be generating at least triple their salary in billed work in order to be an effective resource.
At one practice I saw NQ's charged at £100 ph but then chargeable time was 70%-ish and recovery of WIP was about the same.
£100 x 40 hours x 48 weeks = £192,000 x 70% = £134,400 x 70% = £94,080.
Divide by 3 = £31,360 about right for an NQ give or take a couple of grand either way.
If your earning £30k and only billing £50k p/a something's wrong. Think of it another way would you take on another say 30 clients (£50k) and be happy with only £10k p/a profit, and before tax at that.