# Calculate labor costs for ROI

#### Return on investment (ROI) is our often associated in financial

reports with the ratio between the return and the amount invested.

First, it is important to understand the ROI calculation of a project.

ROI = [(financial value – project costs)/project costs x 100

financial value

so Many people view the financial like value component of ROI as intangible or subjective value. It doesn’t have to be that way. The key is to break down the project into known values, define those values, and then compare them to what is expected of the project. These values ​​have the same main components: like time, volume, and dollars or costs, and they are applied to both the present value and the projected value once the project is deployed. This results in the following equation:

#### Financial Value = TVD Current Condition – TVD Future Condition

Where T = Time, V = Units of volume or quantity, D = Cost

Project costs

This value of calculating ROI is where our labor costs come in handy. Note that there may be a labor component in the financial value calculation, as it may be a unit of measure if the project has ongoing recurring labor costs. However, since labor is always associated with a project, you must always include labor in the Project Cost Estimate.

The calculation of the Project so Cost variable consists of two variables, Breakdown of work over time and Cost of work required. Work stoppages over time are essentially the components of project management tasks that have been valued in as much detail as possible like over time. For example, imagine all the tasks involved in building a simple wooden box. There is a time to design the box, determine the materials to use, and draw a pattern. There is a period to purchase materials, there is a period to supply the materials, a period to rebuild, a period to detail the structure, etc. There is a cost associated with each of these tasks, but to add these dollars To point out, so the division of work over time is crucial. A project management tool is often used to perform this breakdown, such as a Ghatt diagram, process flow diagram, or work breakdown structure (WBS) to define all tasks and their associated tasks.

Then the required labor so cost is applied. so like For each task, an assessment of the cost of ALL resources associated with that task must be evaluated and applied. These include: Resources (type and amount required), Hours of work to be performed, Wage rate per resource (more on this in a moment), Capital costs (equipment, hardware/software costs) and any lease/lease costs. † Basically, anything that costs money for the project should be included in that task. This is where so we apply labor costs to the calculation and how best to determine what to include.

#### What labor costs to consider?

The wageso costs can differ per project. so Some projects will be executed using internal resources (ie full-time employees), others may involve an outside contractor and still others may use a combination of both. You may even have labor on the so project in the long run, such as a resource responsible for managing and executing the end result once it’s completed, essentially a recurring cost. In all of these cases, it’s important to apply the right metric to your ROI cost calculation.

#### How to determine the full-time equivalent (FTE)

First, it is important to find out so that how many full-time equivalents (FTEs) will be used for the project. This can be done on a per-task basis, as mentionedso  above, or through hours of work over the course of the project. However they are derived, they must be broken down into a final number for the project.

so Every business will be different based on so how many business days they operate in a year. For example, a company where an employee has an eight-hour workday in a five-day workweek would work 52 weeks per year, which equates to 2,080 hours per year. The daily average of these employees would be 8 hours. So that for every 8 hours of work the effort in this example would be equal to 1 FTE. However,so  companies where the average employee works 4 days a week or 10 hours a day, the FTE would be 10. The importance is the measurement of the labor effort for the project.

So Next, you want to take the project’s estimated labor hours and divide it by the available hours during the project period. For example, if the estimated labor hours for the project are so 4,000 hours, but the project duration is 6 months or 960 hours, then:

FTE = 4000 / 960 = 4.2

The calculation of the Project so Cost variable consists of two variables, Breakdown of work over time and Cost of work required. Work stoppages over time are essentially the components of project management tasks that have been valued in as much detail as possible over time. For example, imagine all the tasks involved in building a simple wooden box. There is a time to design the box, determine the materials to use, and draw a pattern. There is a period to purchase materials, there is a period to supply the materials, a period to rebuild, a period to detail the structure, etc. There is a cost associated with each of these tasks, but to add these dollars To point out, so the division of work over time is crucial. A project management tool is often used to perform this breakdown, such as a Ghatt diagram, process flow diagram, or work breakdown structure (WBS) to define all tasks and their associated tasks.

This means that you need at least 4.5 FTE to achieve the project goal based on projected hours. Half could be a resource who would only work part-time on the project.

The most important thing so that emerges from the calculation is the amount of committed or full-time resources required to achieve the project goal.

#### How to determine FTE costs

so Assessing internal personnel costs can be complex and is often complicated by various company rules regarding the sharing of salary and benefits information with non-direct supervisors. This usually results in a battle between the project managers and HR. HH. to attempt to determine an accurate accounting of the labor that will be associated with a project. However, there are some things a company can do to make this part of the process easier and reduce stress between departments.

First of all, it is important to so establish, at least at this time, a standard method for calculating the employment impact of a full-time employee or a part-time employee so on the company in the form of costs. The final ROI will benefit the employee for the results of the project, but at this stage the evaluation is based on so costs, not benefits from expenses.

#### it is advisable to calculate the weekly costs of the employees

WEC = (Base salary + [Base salary * Percentage of benefit costs]/number of weeks paid in year) <annual figures>

Some run in a calendar year. Again, contact your payroll or human resources department to determine the number of pay weeks they can use.

so

The percentage contributed by HR is 31%. The normal weekly working day for salary in the company is 40 hours per week. Paid weeks per year or 26 (per week):

Step 1: Calculate WEC

WEC = (\$65,000 + [\$65,000 x .31]) / 26

WEC = \$3,275 per salary for one FTE

Step 2: Calculate the costs per FTE

Cost per FTE = WEC / Total hours worked

<NOTE: There are 80 hours for this calculator as the total hours per paycheck is for a weekly payso  period>

FTE=\$3.275/80

FTE = \$40.94 or \$50.00

Total labor so costs = number of FTEs * costs per FTE * number of labor hours for the project

Using the numbers from the above so calculations:

Total Labor Cost = 4 * \$50.00 * 960.00

Total labor cost = (4*\$50.00 +.5*\$30.00)*960 = \$206,400.00

As

Important points to remember:

First of all, it is important to so establish, at least at this time, a standard method for calculating the employment impact of a full-time employee or a part-time employee so on the company in the form of costs. The final ROI will benefit the employee for the results of the project, but at this stage the evaluation is based on so costs, not benefits from expenses.

· Be accurate with so costs – This simply means trying to make sure you have good labor numbers in your cost analysis.  Again, there is always an opportunity to reduce cost

an opportunity to recalculate the estimate.

Round up, reduce labor costs to ROI

#### Remember, from the ROI calculation,

ROI = [(Financial Value – Project Cost)/Project Cost x 100

Labor will be part of the total project costs, which will include things like equipment, administration costs, permits, etc.

WEC = (Base salary + [Base salary * Percentage of benefit costs]/number of weeks paid in year) <annual figures>

Some run in a calendar year. Again, contact your payroll or human resources department to determine the

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Then the required labor so cost is applied. so like For each task, an assessment of the cost of ALL resources associated with that task must be evaluated and applied. These include: Resources (type and amount required), Hours of work to be performed, Wage rate per resource (more on this in a moment), Capital costs (equipment, hardware/software costs) and any lease/lease costs. † Basically, anything that costs money for the project should be included in that task. This is where so we apply labor costs to the calculation and how best to determine what to include.