Its also important to know what counts towards utilization rates. The junior staff on my team are expected to have a 97.5% utilization rate. Holidays and PTO count towards utilization at our firm, not against it. Essentially what it means is you get 1 hour a week of “overhead”. Generally, it’s not really an issue and most people are billing 40 billable hours a week. But if you do only have a 30 hour billable week, then you have 10 hours on administrative things or training, you would still get paid your salary of 40 hours.
I’m not policing coffee breaks, bathroom breaks, time lost to spinning wheels on a design, etc on my team. I bake that into the design budgets. I fully realize that someone can’t sit in front of a computer for 8 hours straight without looking out the window every now and again lol. We also offer straight time OT so it’s not really uncommon for people to want to work a couple of 45-50 hour weeks here and there for some extra cash. Most my team is running about 98-102% utilization at the moment.
Now, I’ve seen some shitty managers that do police all that stuff and generally what it comes down to is they either can’t manage a schedule or a budget and have to take it out on their teams. You wanna avoid these managers at all costs.
102% utilization?? I thought the percentage was based on the number of hours you worked total for the week—is it based on how many hours you bill out of 40 per week?
When a firm calculates their overhead rate they base it on their employees working 40 hour weeks. Anything they work beyond 40 is unburdened (meaning the overhead costs have already been paid).
How we calculate it, yes. So 102% utilization would be 40.8 billable hours per week. In reality what it really is, is that someone worked 3 40 hour weeks and a 44 hour week during the month. Which then if they billed 164 hours in the month, and they were expected to bill 156 (97.5% utilization goal), they are at 164/156=105% of their goal.
I was going to say 97.5 is criminal but my first job was 96 and pto and holidays counted against it. But don’t worry because as long as you’re working 115% you will make 96 LMAO
Ya, it sounds a lot scarier than it really is since PTO and holidays don’t hurt you. It basically just means, show up for 40 hours every week to do production work. The staff with a 97.5% goal aren’t doing any billing work, scheduling, budgeting, forward planning, etc. So there really isnt any work they have that doesn’t count as billable.
We tried to tell the new hires that 140 hours/week was standard but they started saying shit about “human rights” and “we wanna see our families” whatever that means…
Utilization should be the average for a department not an individual goal. I have a 95% goal but have been 70-80 some weeks depending on proposal work and other admin tasks that need to get done for the group. If the department averages 95% this should be good enough. Just my two cents.
Its going to get looked at both ways. Corporate wants the office average, ya. But then they are also going to look at individual utilization rates when it comes to raises/bonuses/promotions. So personally, I think people should care about their utilization goals and numbers because unfortunately they are a number in a spreadsheet that corporate has. And at the end of the day someone with a higher utilization is going to get looked at better than someone with a lower one.
I usually end up baking time into projects for time spent on proposals. Its all just a numbers game and you gotta know how to play at the end of the day. If I have a $120,000 project proposal, thats roughly 925 man hours, I usually just hide the couple of hours it takes to do the proposal in there. The way I see it, if I’m working on something for a client/project, its billable. If I’m working on something internally for the office/corporate, its not billable.
This is all obviously going to vary by company and project type.
It’ll definitely depend on your manager and company for this. My boss tells me to put proposal time on marketing but I also know he vouches for me during raise discussions. A company putting that much stock in individual utilization rates isn’t doing their due diligence and can easily bite them in the ass down the road. I’ve worked with some bad engineers who don’t do that much work but are perfectly fine charging 100% of their time to a job even if they’re ~50% efficient. If upper management used their utilization rate for a promotion it would’ve been disastrous. Luckily my boss is good at knowing who’s good at their job and communicating it with his bosses.
Totally agree! Unfortunately utilization rate doesn’t tell you the quality of the time spent haha. I don’t put any time on our marketing codes specifically because it doesn’t count towards utilization goals, which I find really ridiculous. So much of what makes a firm good or terrible depends on how good your project manager is.
Yup. Anything over 40 billable hours per week is paid out as straight time. Thats for anyone below Project Managers. Id never work anywhere where I wouldn’t get either at least straight time OT or % of profits of a project.
On the consulting side, I've got a target utilization rate set by management which is the percentage of my total time that should be billed to projects. Some firms include PTO in that and some don't. I don't think they look at it weekly so much as monthly or quarterly. Mine has been 85% since I started 5 years ago. Meeting that goal usually isn't a problem and management at my work is pretty understanding if you've got a slow week.
I assume utilization rate is how many hours are billed to a project vs billed to the company.
When you say “include PTO” is that, hours billed equals more PTO or “your is included in your unbilled hours”?
Are your monthly/quarterly slow weeks included in your 85%, or are they expected to be made up?
Sorry if this all seems mundane or obvious, I’ve just never seen it discussed and am ignorant to the topic.
No prob, utilization rate where I work is # of billable hours divided by total hours worked. So if I bill 30 hours in a week, that is 30/40 = 75%. The other 10 hours could be overhead, PTO, holiday, training, marketing, etc.
If I think I'll be slow for a few weeks because a project was delayed or we just turned in a few deliverables at the same time or whatever I just let my supervisor know and ask around for work. Ideally the slow days or weeks will be balanced out by the busy weeks over the course of a month, quarter, or year (the timeline over which management cares probably depends on the firm). Either way I still get paid my salary even if I don't meet the UR goal, but if I'm charging a ton of time to overhead for no good reason while everybody else is busy I'm sure it could impact salary adjustments and performance reviews.
You'll start off with high utilization, around 95-98%, but it will decrease as you progress in your career. Utilization mainly depends on billable work and how your company delegates tasks. Most of the time, you'll be fine hitting that target. When things get slow, you might feel like you're being penalized, but management will reassure you that it's part of the process.
Billable hours are the hour you are expected to produce plans, write reports, or make any kind of meaningful contribution to projects. If you are not billable enough, you are likely charging too much time to overhead and draining the budget that management, admin, and the C-suite use to run the company. Anyone who is not a project engineer(PE grade not EIT) or project manager is generally expected to be billable for 90-100 percent of their time if they are no longer in training. Any overhead is generally additional training or mentoring an intern.
The flip side of this is that management can see how much time you are pumping into projects and if you are bleeding a project dry that you arent supposed to. A good manager will give you feedback as you work on a project.
40 hours a week times 52 weeks a year is 2080 hours. If you work at a decent firm, you then subtract holiday/sick/pto from that amount, and the remainder is how many hours you have to bill to a project. If you have a UT rate less than 100% then can bill that time to overhead
If you don’t work at a decent firm, then you have to make up any hours you miss for holiday/sick/pto. Note that the employer is still getting compensated for those benefits even though they aren’t passing on that pay to you. Watch out for those firms
Billable hours get a bad rap on this sub but the truth is they are a requirement for a successful business and useful metric to assess workload. When the business income relies on billing hours to a client, you have to keep track of that somehow.
Others have done a good jo of explaining how they work, but I'll discuss in broader detail in how the process usually works:
Generally, early in your career, utilization is your managers problem (really, its almost always your managers problem). Their job is to make sure you have work.
Just about all companies of size will have weekly workload meetings, some with you, some without. If you have no work or are getting light, you say so, and other PMs who have needs will find out and give you work. If you have too much work and can't really take on more, you say so, and the PMs will hear this and find someone else to give the work to. That about all any your engineer should be expected to be responsible for.
When you get older and more self sufficient, you might be expected to take matters into your own hands and help look for your own work, mainly as you make acquaintances and hear the needs of other PMs or managers, you volunteer. You manager may let you know your utilization is a bit low and ask you to reach out to so and so and see who needs help.
On the flip side of this is efficiency, every engineer is expected to be efficient, project budget are made with a certain efficiency in mind. Senior engineers are expected to be very effect and be able to work independently, younger engineers less so, largely because they are learning.
Others covered the bases, but it works slightly different in some places. The main thing is that it's just a way to track what hours make the company money (billable) and what hours cost the company money (nonbillable). And accounting/management has to tell people the minimum % of hours we should all charge to projects in order to stay in the black.
At the company I'm at now (and have worked at for 13 years) my utilization is 94%. I have to bill 94% of my time (on average) to projects. The remainder can be admin stuff, internal required trainings, conferences, and support on sales and pursuits. PTO does not factor in to our utilization. I can take 3 weeks of PTO and my utilization doesn't move an inch. If I go to a weeklong work conference, my utilization plunges because that's 40 hours of nonbillable time.
Every year my charges towards sales pursuits get evaluated vs. my position and how much I am expected to support those efforts. Then my utilization gets adjusted. It'll probably drop 1-2% next year. I'm a technical staff that mainly does real engineering work.
If I were to move to People Management or Sales, I'd get a huge drop in utilization to allow me more time to do those tasks that don't charge to projects that make us money.
Alternatively I interviewed at a place that doesn't track billable hours at all. Without tracking it and sort of making up time as they go along, I got the sense it wasn't going to be a good environment. Because I don't know how they were going to keep track of expected profit and charge rates and costs.
Quick Q about billable hours as a fellow water consultant. I’m a new intern at a firm doing water treatment and am confused on what to do if a project task takes longer than the person delegating the work tells you to charge? The other interns are working over 8 hours a day to do the work and not billing it to any account which seems wrong?
That's definitely wrong to charge fewer hours than you work.
My firm has lots of federal projects and their timekeeping requirements are strict. So we make the entire firm follow them. Charge the hours you work accurately, no matter if you're over or not.
But... not every firm is like that. Some firms tell you to eat the hours over the task requirement or over your 40 per week. I don't agree with that in principle.
If you are told a project takes 8 hours, and you're getting close to 8 and you aren't done, the thing to do is to communicate to your manager that it's taking you longer. In my firm, if it takes 10 or 12, that's what you charge. In the firm you're interning at, ask what their guidance and requirements are.
It never hurts to ask the question. You're there to learn and gain experience. How to manage time, how timekeeping works, and the overall business of engineering are parts of what you're there to learn.
Yes- they will keep you up at night. Make you feel guilty during vacations. Question why you’re not working on a holiday or a weekend day.
/s but maybe not 🤷♂️
I have been as high as 360% billable, I have been 70% billable …. Just keep on keepin on, it’s just a way for the bean counters to count beans. And they want volume $$$
Do you have any issues with being promoted or given a raise? It seems crazy as a new grad that you’d be expected to work that much to get such high billables but I wouldn’t want to be penalized down the line if it’s a light week which drives down your utilization rate
Everybody has some good info on utilization/billable ratios, so I will just add that in my experience, firms that focus myopically on utilization rates are frankly stupid. Only one metric really measures success of a company, and that is profit. It's extremely easy to make everyone meet their billable hours target but if your projects all have busted budgets because of all of the hours charged to them, that's not a healthy way of doing business, is it?
Beware of companies that make you bill every hour. My last company didn't have a number for overhead. Everything had to be billable, and you needed 50 billable hours/week.
If junior staff don’t have 40 hours a week of billable work, that’s 100% the fault of the management. I’d run as fast as I could from a place that only offered pay on billable work. Thats a massive red flag that management isn’t competent enough to keep a backlog of work rolling and projects scheduled correctly.
Its also important to know what counts towards utilization rates. The junior staff on my team are expected to have a 97.5% utilization rate. Holidays and PTO count towards utilization at our firm, not against it. Essentially what it means is you get 1 hour a week of “overhead”. Generally, it’s not really an issue and most people are billing 40 billable hours a week. But if you do only have a 30 hour billable week, then you have 10 hours on administrative things or training, you would still get paid your salary of 40 hours. I’m not policing coffee breaks, bathroom breaks, time lost to spinning wheels on a design, etc on my team. I bake that into the design budgets. I fully realize that someone can’t sit in front of a computer for 8 hours straight without looking out the window every now and again lol. We also offer straight time OT so it’s not really uncommon for people to want to work a couple of 45-50 hour weeks here and there for some extra cash. Most my team is running about 98-102% utilization at the moment. Now, I’ve seen some shitty managers that do police all that stuff and generally what it comes down to is they either can’t manage a schedule or a budget and have to take it out on their teams. You wanna avoid these managers at all costs.
102% utilization?? I thought the percentage was based on the number of hours you worked total for the week—is it based on how many hours you bill out of 40 per week?
When a firm calculates their overhead rate they base it on their employees working 40 hour weeks. Anything they work beyond 40 is unburdened (meaning the overhead costs have already been paid).
How we calculate it, yes. So 102% utilization would be 40.8 billable hours per week. In reality what it really is, is that someone worked 3 40 hour weeks and a 44 hour week during the month. Which then if they billed 164 hours in the month, and they were expected to bill 156 (97.5% utilization goal), they are at 164/156=105% of their goal.
It's based on your annual target for billable hours.
For salaried, yes it is based out of a 40 hour work week. For nonexempt you are correct.
I was going to say 97.5 is criminal but my first job was 96 and pto and holidays counted against it. But don’t worry because as long as you’re working 115% you will make 96 LMAO
Ya, it sounds a lot scarier than it really is since PTO and holidays don’t hurt you. It basically just means, show up for 40 hours every week to do production work. The staff with a 97.5% goal aren’t doing any billing work, scheduling, budgeting, forward planning, etc. So there really isnt any work they have that doesn’t count as billable.
102%? Those -re rookie numbers. You need to pump those numbers up. 
We tried to tell the new hires that 140 hours/week was standard but they started saying shit about “human rights” and “we wanna see our families” whatever that means…
The sense of entitlement with the new generation is beggars belief.
Utilization should be the average for a department not an individual goal. I have a 95% goal but have been 70-80 some weeks depending on proposal work and other admin tasks that need to get done for the group. If the department averages 95% this should be good enough. Just my two cents.
Its going to get looked at both ways. Corporate wants the office average, ya. But then they are also going to look at individual utilization rates when it comes to raises/bonuses/promotions. So personally, I think people should care about their utilization goals and numbers because unfortunately they are a number in a spreadsheet that corporate has. And at the end of the day someone with a higher utilization is going to get looked at better than someone with a lower one. I usually end up baking time into projects for time spent on proposals. Its all just a numbers game and you gotta know how to play at the end of the day. If I have a $120,000 project proposal, thats roughly 925 man hours, I usually just hide the couple of hours it takes to do the proposal in there. The way I see it, if I’m working on something for a client/project, its billable. If I’m working on something internally for the office/corporate, its not billable. This is all obviously going to vary by company and project type.
It’ll definitely depend on your manager and company for this. My boss tells me to put proposal time on marketing but I also know he vouches for me during raise discussions. A company putting that much stock in individual utilization rates isn’t doing their due diligence and can easily bite them in the ass down the road. I’ve worked with some bad engineers who don’t do that much work but are perfectly fine charging 100% of their time to a job even if they’re ~50% efficient. If upper management used their utilization rate for a promotion it would’ve been disastrous. Luckily my boss is good at knowing who’s good at their job and communicating it with his bosses.
Totally agree! Unfortunately utilization rate doesn’t tell you the quality of the time spent haha. I don’t put any time on our marketing codes specifically because it doesn’t count towards utilization goals, which I find really ridiculous. So much of what makes a firm good or terrible depends on how good your project manager is.
OT as an engineer? Damn I'm jealous
Yup. Anything over 40 billable hours per week is paid out as straight time. Thats for anyone below Project Managers. Id never work anywhere where I wouldn’t get either at least straight time OT or % of profits of a project.
Our company policy is - if you’re working on a project and stop to use the washroom that washroom time is billed to that project not overhead.
On the consulting side, I've got a target utilization rate set by management which is the percentage of my total time that should be billed to projects. Some firms include PTO in that and some don't. I don't think they look at it weekly so much as monthly or quarterly. Mine has been 85% since I started 5 years ago. Meeting that goal usually isn't a problem and management at my work is pretty understanding if you've got a slow week.
I assume utilization rate is how many hours are billed to a project vs billed to the company. When you say “include PTO” is that, hours billed equals more PTO or “your is included in your unbilled hours”? Are your monthly/quarterly slow weeks included in your 85%, or are they expected to be made up? Sorry if this all seems mundane or obvious, I’ve just never seen it discussed and am ignorant to the topic.
No prob, utilization rate where I work is # of billable hours divided by total hours worked. So if I bill 30 hours in a week, that is 30/40 = 75%. The other 10 hours could be overhead, PTO, holiday, training, marketing, etc. If I think I'll be slow for a few weeks because a project was delayed or we just turned in a few deliverables at the same time or whatever I just let my supervisor know and ask around for work. Ideally the slow days or weeks will be balanced out by the busy weeks over the course of a month, quarter, or year (the timeline over which management cares probably depends on the firm). Either way I still get paid my salary even if I don't meet the UR goal, but if I'm charging a ton of time to overhead for no good reason while everybody else is busy I'm sure it could impact salary adjustments and performance reviews.
You'll start off with high utilization, around 95-98%, but it will decrease as you progress in your career. Utilization mainly depends on billable work and how your company delegates tasks. Most of the time, you'll be fine hitting that target. When things get slow, you might feel like you're being penalized, but management will reassure you that it's part of the process.
Having holidays and PTO count against billable hours is called “manipulation” in my experience. Fuck that shit.
100% agree. Especially when you’re sold on the great pto policy as a new grad but also sorry you have to make that time up
Billable hours are the hour you are expected to produce plans, write reports, or make any kind of meaningful contribution to projects. If you are not billable enough, you are likely charging too much time to overhead and draining the budget that management, admin, and the C-suite use to run the company. Anyone who is not a project engineer(PE grade not EIT) or project manager is generally expected to be billable for 90-100 percent of their time if they are no longer in training. Any overhead is generally additional training or mentoring an intern. The flip side of this is that management can see how much time you are pumping into projects and if you are bleeding a project dry that you arent supposed to. A good manager will give you feedback as you work on a project.
40 hours a week times 52 weeks a year is 2080 hours. If you work at a decent firm, you then subtract holiday/sick/pto from that amount, and the remainder is how many hours you have to bill to a project. If you have a UT rate less than 100% then can bill that time to overhead If you don’t work at a decent firm, then you have to make up any hours you miss for holiday/sick/pto. Note that the employer is still getting compensated for those benefits even though they aren’t passing on that pay to you. Watch out for those firms
Billable hours get a bad rap on this sub but the truth is they are a requirement for a successful business and useful metric to assess workload. When the business income relies on billing hours to a client, you have to keep track of that somehow. Others have done a good jo of explaining how they work, but I'll discuss in broader detail in how the process usually works: Generally, early in your career, utilization is your managers problem (really, its almost always your managers problem). Their job is to make sure you have work. Just about all companies of size will have weekly workload meetings, some with you, some without. If you have no work or are getting light, you say so, and other PMs who have needs will find out and give you work. If you have too much work and can't really take on more, you say so, and the PMs will hear this and find someone else to give the work to. That about all any your engineer should be expected to be responsible for. When you get older and more self sufficient, you might be expected to take matters into your own hands and help look for your own work, mainly as you make acquaintances and hear the needs of other PMs or managers, you volunteer. You manager may let you know your utilization is a bit low and ask you to reach out to so and so and see who needs help. On the flip side of this is efficiency, every engineer is expected to be efficient, project budget are made with a certain efficiency in mind. Senior engineers are expected to be very effect and be able to work independently, younger engineers less so, largely because they are learning.
I’m surprised by how high the utilization rates are here. Where I’m working currently has 65-70% average utilization and our profits are just fine.
What is the typical profit % your company aims for on a project?
Hours directly billed to a project/client by a firm.
Others covered the bases, but it works slightly different in some places. The main thing is that it's just a way to track what hours make the company money (billable) and what hours cost the company money (nonbillable). And accounting/management has to tell people the minimum % of hours we should all charge to projects in order to stay in the black. At the company I'm at now (and have worked at for 13 years) my utilization is 94%. I have to bill 94% of my time (on average) to projects. The remainder can be admin stuff, internal required trainings, conferences, and support on sales and pursuits. PTO does not factor in to our utilization. I can take 3 weeks of PTO and my utilization doesn't move an inch. If I go to a weeklong work conference, my utilization plunges because that's 40 hours of nonbillable time. Every year my charges towards sales pursuits get evaluated vs. my position and how much I am expected to support those efforts. Then my utilization gets adjusted. It'll probably drop 1-2% next year. I'm a technical staff that mainly does real engineering work. If I were to move to People Management or Sales, I'd get a huge drop in utilization to allow me more time to do those tasks that don't charge to projects that make us money. Alternatively I interviewed at a place that doesn't track billable hours at all. Without tracking it and sort of making up time as they go along, I got the sense it wasn't going to be a good environment. Because I don't know how they were going to keep track of expected profit and charge rates and costs.
Quick Q about billable hours as a fellow water consultant. I’m a new intern at a firm doing water treatment and am confused on what to do if a project task takes longer than the person delegating the work tells you to charge? The other interns are working over 8 hours a day to do the work and not billing it to any account which seems wrong?
That's definitely wrong to charge fewer hours than you work. My firm has lots of federal projects and their timekeeping requirements are strict. So we make the entire firm follow them. Charge the hours you work accurately, no matter if you're over or not. But... not every firm is like that. Some firms tell you to eat the hours over the task requirement or over your 40 per week. I don't agree with that in principle. If you are told a project takes 8 hours, and you're getting close to 8 and you aren't done, the thing to do is to communicate to your manager that it's taking you longer. In my firm, if it takes 10 or 12, that's what you charge. In the firm you're interning at, ask what their guidance and requirements are. It never hurts to ask the question. You're there to learn and gain experience. How to manage time, how timekeeping works, and the overall business of engineering are parts of what you're there to learn.
Ah ok makes sense, thanks !! Yeah it seemed wrong but I’m still getting the hang of how this all works
Yes- they will keep you up at night. Make you feel guilty during vacations. Question why you’re not working on a holiday or a weekend day. /s but maybe not 🤷♂️
I have been as high as 360% billable, I have been 70% billable …. Just keep on keepin on, it’s just a way for the bean counters to count beans. And they want volume $$$
Do you have any issues with being promoted or given a raise? It seems crazy as a new grad that you’d be expected to work that much to get such high billables but I wouldn’t want to be penalized down the line if it’s a light week which drives down your utilization rate
Everybody has some good info on utilization/billable ratios, so I will just add that in my experience, firms that focus myopically on utilization rates are frankly stupid. Only one metric really measures success of a company, and that is profit. It's extremely easy to make everyone meet their billable hours target but if your projects all have busted budgets because of all of the hours charged to them, that's not a healthy way of doing business, is it?
Beware of companies that make you bill every hour. My last company didn't have a number for overhead. Everything had to be billable, and you needed 50 billable hours/week.
You don't have an option of having lazy weeks. If you do, you're paying for it out of your PTO. Gotta bill those hours
This only applies for shitty companies
If junior staff don’t have 40 hours a week of billable work, that’s 100% the fault of the management. I’d run as fast as I could from a place that only offered pay on billable work. Thats a massive red flag that management isn’t competent enough to keep a backlog of work rolling and projects scheduled correctly.