Guide
    Team Management

    Understand how staff cost is calculated

    Learn how AtomicSam calculates the hourly cost for your staff members. This helps you understand job profitability and make informed decisions.

    5 min read
    Updated May 9, 2026

    This guide explains how your staff members' salaries are turned into an hourly cost rate. Understanding this calculation helps you see the true cost of time on your jobs and accurately measure profitability.

    To calculate the profit on a job, you need to know not just what you charged, but what it cost to deliver. A key component of this cost is your team's time. AtomicSam gives you a clear picture of this by converting each staff member's annual employment cost into a simple hourly rate.

    Before you start

    • You need to have Admin permissions to view and edit staff member costs.

    How we calculate the hourly rate

    We calculate the hourly cost rate with a straightforward formula: a staff member's total annual cost is divided by the number of available working hours in a year. We use an industry-standard model to estimate available time.

    1. Step 1: Determine the Total Annual Cost
      The total cost of a staff member is more than just their salary. We combine three key figures to find the total annual employment cost.

      • Salary: The base salary you enter for the staff member.
      • On-costs: Costs directly tied to employment, such as payroll tax or employer-funded insurance contributions.
      • Overheads: A share of your organization's general running costs, like rent, utilities, and software subscriptions.

      You can enter these values for each person in their staff member profile. The formula is Salary + On-costs + Overheads = Total Annual Cost.

    2. Step 2: Determine the Annual Working Days
      Not every day is a working day. To find the number of available days for work, we start with 365 days and subtract non-working time.

      • Weekends (104 days)
      • Public holidays (default is 10 days)
      • Annual leave (default is 20 days)
      • Personal or sick leave (default is 10 days)

      This calculation results in an average of 221 working days. AtomicSam uses a default of 230 working days per year as a standard divisor. This accounts for variations in leave and provides a consistent baseline across your team.

      💡 Tip: The 230-day model is a reliable average used in many professional service industries. It ensures your costing remains stable even when individual leave patterns change from year to year.

    3. Step 3: Calculate the Final Hourly Rate
      First, we convert the annual working days into hours. Based on a standard 8-hour day, the total available hours are 230 days × 8 hours/day = 1,840 hours.

      Finally, we divide the Total Annual Cost by the total available hours. This gives you the staff member's hourly cost rate.

    Example calculation

    Let's look at a staff member with the following costs:

    Cost Component Amount
    Salary $80,000
    On-costs $12,000
    Overheads $8,000
    Total Annual Cost $100,000

    The hourly cost rate would be: $100,000 ÷ 1,840 hours = $54.35 per hour. Every time entry this staff member records will use this rate to calculate the cost against a job.

    View or edit a staff member's cost

    You can find the fields for these calculations in each staff member's profile.

    1. Navigate to Settings → Staff.
    2. Select a staff member from the list to open their profile.
    3. Go to the Financials tab.
    4. Here you can enter the Salary, On-costs, and Overheads.
    5. The calculated Hourly Cost Rate is displayed at the bottom of the section.

    Override the calculated cost rate

    The automatic calculation works well for most salaried staff members. For contractors or other non-standard roles, you may need to set a specific hourly cost.

    1. Follow the steps above to navigate to the staff member's Financials tab.
    2. Find the Cost Rate Calculation setting.
    3. Change the selection from Automatic to Manual Override.
    4. An editable field will appear. Enter the exact Hourly Cost Rate you want to use.
    5. Select Save.
    ⚠️ Heads up: When you use a manual override, the system ignores the salary, on-costs, and overheads fields for cost calculation. If this person's cost changes, you must update the manual rate yourself.

    Good to know

    • Cost rates are not retroactive. When you update a staff member's cost, the new rate applies only to time entries created from that point forward. Existing job margins will not change.
    • You can adjust the default number of working days and hours per day for your entire organization. Go to Settings → Organization → Defaults to change these values.
    • The cost rate is an internal figure used for profitability reporting. It is never visible to your clients.

    What's next

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