In some companies, managers are held responsible for the profit margin of entire projects and the work of the employees assigned to them. To check the planned and performed profitability of employees in the project, you can go to the **Projects Finances** report in the** Reports** tab.

## Table of Contents

How does that work in Time and materials projects?

How does that work in fixed-price projects?

Method of calculating cost and income overhead

## How does that work in Time and materials projects?

To calculate the profitability of an employee in **time and materials,** we have to determine a percentage ratio of the profit to the employee's work costs.

There is no advanced mechanism for calculating the employee's rate because the manager always manually enters it. You get the scheduled, not settled, and settled status income by multiplying the hours by the manually entered rate.

## How is it counted?

To calculate employee profitability, the following formula is used:

**Employee Profitability** = [(Revenue - Cost) / Cost] * 100

**Where:**

**Revenue** is the product of the employee's work hours and the revenue rate.

**The cost** is the product of the employee's number of hours and the cost rate.

Now, let's calculate the employeeâ€™s profitability based on the given data:

**Income rate**: PLN 200/h

**Cost rate:** PLN 100/h

**Number of hours worked by employee in a month:** 50 hours

**Employee's profitability** = [(PLN 10,000 - PLN 5,000) / PLN 5,000] * 100% = 100%

It is worth noting that even if that employee only works 10 hours and the manager enters this number in the system, the profitability is still 50%. This is because the manager enters the hourly rate in advance and does not change depending on the actual number of hours worked.

## How does that work in fixed-price projects?

Fixed price is a model that guarantees a fixed budget for the project, regardless of time and effort. It means that the client is interested in something other than the number of hours but in the effect. However, **achieving the outcome is only possible with the work of people with different experience levels.**

The skill rate is the answer to **how to calculate the income generated in the project FIX PRICE by more or less experienced people.**

The assumption is that** a more experienced person will generate more income**. How much more do you think? You decide by setting the appropriate** Skill Rate** on a scale from **1 to 10** to add and edit** a staff contract.**

Calculating the profitability of people with often irregular payments also becomes possible thanks to the introduction of the so-called income period. **The income period** in the fixed-price project is a period counted from the moment of the first payment to the next one.

## How is it counted?

## Method of calculating cost and income overhead

We take the total for a given month. The formula is universal for each state: scheduled, not settled, and settled.

But it is not everything. The method of calculating overheads differs depending on the setting in the **Admin role**:

Below in the graphic you will find an explanation of how checking the checkbox will affect the calculations:

## Definitions

**Skill Rate** is a simple system Primetric developed to calculate the income per person in fixed-price projects. By determining the employee's Skill Rate on a scale of 1 to 10, we **determine the value of their work in the fixed-price project.**

**The income period **is counted from the moment of the first payment to the next in the fixed-price project.

**Skill hours **- hypothetical number of hours worked by the employee. **The number of actual hours is multiplied by the skill rate.**

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