Knowing how much you cost per hour is an important step to take before you can work on improving your time management. You can then estimate the cost of all your activities and get motivated to improve your time management as you see the real cost of the things you do.
The standard approach to calculating your hourly pay is as follows:
- Take your salary plus any variable element you received and divide by the number of working days in a year. For most this will be 220 or so.
- Divide that number by the number of hours worked per day. For most this will be 8.
- You then have your hourly rate which you can apply to all your work activities.
What are the weaknesses of this approach?
- It is inaccurate. Your salary and bonus are not the total costs of employing you. There are employer taxes, social charges, pension contributions, health care, insurance and any other benefit you receive. While this will vary by employer and by country, it will in most cases add a significant amount to your hourly pay calculation.
- It assumes a traditional approach to working. Not everyone these days works 8 hours a day 5 days a week with a few weeks holiday. A job that expects you to work 60 hours a week actually has a lower hourly rate than the one calculated as above. This can be shocking in itself!
- It excludes others. While sometimes you may be working alone, most jobs involve engaging with others. That phone call, that meeting, even that email all have a cost that is more than just you. Without including them you are only getting a partial picture of the cost of things.
How can you better calculate your hourly pay?
- Get your total post cost. Your accounts department will have a figure that covers all the main costs associated with employing you. If you live in Europe this can be significantly higher than your gross salary. Use this number when calculating your hourly pay. It will give you a much more accurate picture of your real cost.
- Do a time log first. A week's time log should give you a better idea of how many hours you actually work. Include the weekend if you find yourself on calls or checking email over the weekend. Multiply this week by 52. This gives you your yearly hours worked before holiday.
- Cut taken holiday. It is not a holiday if you work on it. Many people take less than the days off they are entitled to. How many non-working days did you actually take? Assume each holiday day is worth 8 hours and deduct from your yearly total.
- Re-calculate your hourly pay with these new numbers. If you work a lot of hours you may be shocked by how low it is even after adding all the costs!
- Get your team to do the same. It is a very powerful thing to know the total cost of all the team activities. To end a meeting by saying how much it cost and asking whether it is worth it can have a transformational effect on team efficiency.
- Calculate the hourly pay of those you engage with. While you won't have access to individual pay, most accounts departments have average post cost figures for different job types to help them with planning. Use these and estimate hours worked based on your knowledge of their work. With these figures you can get a better picture of the true cost of all the activities you engage in.
This should help you calculate your hourly pay more accurately so you can use it to improve your time management.
What would you do to better calculate your hourly pay?