Enter the billable hours and the available hours into the Calculator. The calculator will evaluate the Labor Utilization.

Labor Utilization Formula

LU = BH / AH * 100

Variables:

• LU is the Labor Utilization (%)
• BH is the billable hours
• AH is the available hours

To calculate Labor Utilization, divide the total billable hours by the available or maximum hours, then multiply by 100.

How to Calculate Labor Utilization?

The following steps outline how to calculate the Labor Utilization.

1. First, determine the billable hours.
2. Next, determine the available hours.
3. Next, gather the formula from above = LU = BH / AH * 100.
4. Finally, calculate the Labor Utilization.
5. After inserting the variables and calculating the result, check your answer with the calculator above.

Example Problem :

Use the following variables as an example problem to test your knowledge.

billable hours = 300

available hours = 700

What are billable hours and how do they differ from available hours?

Billable hours refer to the time spent on tasks that can be charged to a client, while available hours include all potential working hours, regardless of whether they are billable or not.

Why is calculating Labor Utilization important for a business?

Calculating Labor Utilization helps businesses understand how effectively they are using their workforce’s available hours for billable tasks, impacting profitability and efficiency.

Can Labor Utilization affect employee performance and business operations?

Yes, high Labor Utilization rates can indicate efficient use of workforce time, potentially leading to better performance and profitability. Conversely, low rates may highlight inefficiencies or overstaffing.

How can businesses improve their Labor Utilization rate?

Improving Labor Utilization can involve better project management, reducing non-billable tasks, and ensuring that employees have the right tools and training to work efficiently.