Rapport 3 - User Community

Introduction

• Rapport3 project costing module is used to capture staff time, apply a cost to this time and compare this accumulated data against a predefined project plan. This base information can then be reported on and summarised through the various levels of your organisation, from an individual employee through to a company division.
• It is important to have a good understanding of how staff and project rates are used and calculated across Rapport3. Throughout this document, we present detailed notes and worked examples for you to understand how all the factors combine to give you your staff cost rates and project grade rates.
• Essentially there is no right or wrong way of calculating rates; it is up to each organisation to decide what way best suits their business model. Every organisation has a slightly different take on how costs are measured and how accurate they should be. As a rule, the more accurate the figure, the more effort that is required to manage this.

Staff and Project Rates

Cost rates:

• They are calculated by multiplying staff costs by an overhead factor. The Cost rate is made up of the following elements:
  • Base Cost Rate
  • Overtime Cost Rate
  • Overhead Factor
• These rates are unique for each Staff Member and used to calculate actual costs, i.e. labour costs generated from actual Timesheets. The actual hourly cost for any staff member is calculated as follows:
  • Base Cost Rate x Overhead Factor = Cost Rate
  • Overtime Cost Rate x Overhead Factor = Overtime Rate

Project Grade Rates:

• They are set up centrally and act as a default or master rate card for each project.    
  The following details need to be entered in the Project Grade Rates Console.
  • Default Cost Rate
  • Default Charge Rate
• These rates are unique for each Grade member. These are used for forecasting and quite often calculated using an average rate of staff members. Once the time has passed, these forecast figures will be overwritten by the actual staff cost rates.

Project Target Margin:

• Some organisations also include a margin within the cost rate, which is classed as a contingency amount or profit margin. Rapport3 allows for this but defines any cost rate that includes a margin as a charge rate.
• A charge rate includes a profit margin and is applied to a project at grade level. The Charge rate would be used for project that are invoiced on a time charge basis.
• The Project Target Margin is in addition to any inbuilt costs included in the cost rate calculation.

Example:

Staff Base Cost Rates

The base cost rate can be calculated following this example:

Technician – John Smith

Salary: £38,000

Benefits: £2,000

Productivity: 80%

Total annual hours: 1950

• The staff's "base cost rate" typically includes salary, but can also include bonuses, pensions and car allowance, or a mixture of these.
• The productivity figure is based on the portion of total time available dedicated to fee earning work.
• Non fee earning staff will always have a rate of zero as their salary is covered as part of overhead.
• Each time a new rate is entered against a member of staff the previous rate is given an end date and a new rate is created with a start date. Rapport3 will try to ensure there are no gaps between one rate ending and the new rate starting.

Using Average Staff Costs

• Some practices like to use average Base Cost rates for each grade. This can be carried out for ease or for sensitivity of information.

Overhead Factor

• Overhead is a term used to describe costs that are not fee earning staff salaries. These will be items such as rent, electricity, heating, Admin staff salaries, stationary costs etc.
• Overhead should be apportioned across the fee earning staff member to ensure that they are recovering their salary and their portion of the overhead.
• It is worth considering whether it would be beneficial to incorporate Senior Management salaries and benefits as part of the company overhead. This may be sensible if the following situations occur:
  • Senior Management do not complete timesheets so their time spent on Fee earning work is not reflected against the project.
  • Senior management spend so much time on business development that they are not able to recover their salary and share of their overheads by booking time against fee earning work.
• The Overhead factor for each staff member can be updated in the Staff Members HR-Project Rates Tab. Alternatively; it is possible to update the overhead factors for a group of people via the control panel.

Calculating an overhead factor

• Overhead factors will be multiplied by the staff members base cost rate to calculate the Staff cost rates. As a result, each staff member will be apportioned their share of the company overhead based on their salary and productivity.

A typical calculation to establish an overhead factor can be seen below:

Using the base cost rate calculated in Staff Base Cost Rates, John Smith’s cost rate will    
be as follows:

Using an overhead factor of 1

• Some practices opt for an overhead factor of 1 and assign an equal share of the overheads to each fee earner. Essentially a Director would use the same portion of rent, electricity and lighting costs as a student.
• A flat rate will be established by dividing the total overhead of the business and dividing it by the total of the productive hours at the practice. This figure will then be added to each fee earners base cost and an overhead factor of 1 will be used. This will make senior staff cheaper and junior staff more expensive.

A typical calculation to establish an ‘overhead cost’ can be seen below:

Overhead Cost per staff Calculation:

• Director –1950 x 50% = 975
• Associate –1950 x 60% = 1170
• Technician –1950 x 80% =  1560
• Student –1950 x 90% =  1755    
  Total Number of productive hours: 5460 hours

Total Overhead Costs: £160,000 

The Cost rates for each staff member applied against projects on Rapport3 will apportion an equal amount of overhead per hour for each staff member.

Using the base cost rate calculated in section 3, John Smith’s cost rate will be as follows:

Updating your Overhead factor on a periodic basis

• It is recommended that Overhead factors are reviewed periodically to reflect any changes in the total overhead costs of the business. You can opt to calculate the overhead rate annually or as frequently as required. If your organisation's size or costs are changing rapidly you may find the calculations become inaccurate over time unless the factor rates are updated accordingly.
• It is possible to update the overhead factor retrospectively and this will be applied to all time booked against a project during a selected time range. See section Timesheet Re-approval.

Productivity

• The productivity figure is based on the portion of total time available dedicated to fee earning work. As an estimate we suggest that people can reach a maximum productivity of 80% booked on fee earning work. This accounts for just over 10 weeks that is apportioned to absence projects (annual leave, sickness, and any other leave) and any time booked against Admin projects.
• Senior staff may have lower productivity rates due to their involvement in non-fee earning work like Business development and management meetings.
• Once staff start to enter timesheets in Rapport 3, the system will calculate the productivity figure to help with future cost rates. It is possible to review this in the Control panel>timesheet rates section.
• It is worth noting that as productivity goes down, the cost rate may need to go so high that it is worth apportioning some salary into overhead. This may be particularly relevant for Senior staff members.
• Productivity rates are best reviewed over a period, for example 6 months or 1 year.

How to calculate staff productivity rates

The simple calculation can be shown as follows:

• John Smith has a working week of 37.5 hours. Over 52 weeks, this works out as 1950 working hours per year.
• He dedicates every Monday morning to team meetings (4 hours per week – 196 hours per year)
• He also takes his 25 days holidays a year. (187.5 hours)

Based on this information, John’s productivity rate would be as follows:

Reviewing Staff utilisation rates

As timesheets are being recorded in Rapport3, it is possible to review the ‘actual’    
productivity rates of Staff by reviewing the following:

• HR Report – Productivity – 12 month rolling.    
  This shows the actual % of total time booked on fee earning work over the previous 12 months by staff member,
• HR Report – Staff Productivity Report.    
  This shows the actual % of total time booked on fee earning work over a pre- determined date range.
• In order to calculate Staff Cost rates, it is essential to calculate your base cost rate, overhead factor and utilisation rates as outlined above.
• The best way to select which method suits your practice is by reviewing the following three examples:
  • Example 1: Simplified Calculation – All Staff at the company have the same cost rate using average productivity rates. This is a very simplified method of calculating rates so we would recommend that you consider example 2 or example 3 below.
  • Example 2: Complex Calculation using an overhead factor of 1 – All Staff have their own base cost rate calculated from their salary and productivity rate. The Overhead is apportioned equally across each staff member. As each staff member has an equal portion of the overheads, Senior staff members are cheaper and junior staff members become more expensive.
  • Example 3: Complex Calculation using an overhead factor – All Staff have their own base cost rate calculated from their salary and productivity rate. An Overhead factor is calculated for the business and multiplied by each base cost rate. As the overhead factor is multiplied by the individual’s base cost rate, Senior staff members take on a larger proportion of the overhead and become more expensive. As the base cost rate and overhead factors are independent from each other in example 3, this allows for ease of updating when there is a change in an individual’s salary and/or the overhead factor.
• In summary, the cost rates calculated from the three examples can be compared in    the following table:

Example 1 -Simplified Calculation

In the above example, every member of staff would be setup with the same base cost rate of £56.09 in Rapport3. 

Each staff member would be set-up with an Overhead factor of 1. 

Calculation Check: 

If you multiply all the fee earning hours for each member of staff by their corresponding cost rate it will to add up to the total cost of the business

Example 2 – Complex Calculation using an overhead of 1

Overhead Costs  

• Admin staff - £20,000
• Non-salary overhead - £140,000  
  Total Overhead Costs: £160,000

Total Cost of the Business: £350,000  

Firstly, we will need to calculate the Base Cost rates for each staff member:  

Base Cost Rate Calculation:  

• Director – £75,000 /(1950 x 50%) = £76.92
• Associate – £55,000 / (1950 x 60%) = £47.01
• Technician – £40,000 / (1950 x 80%) = £25.64
• Student – £20,000/ (1950 x 90%) = £11.40

Secondly, we will need to apportion the overhead cost equally for each staff member. This calculation involves splitting the total cost of the overheads over the total number of productive hours at the practice.  

Overhead Cost per staff Calculation:  

• Director –1950 x 50% = 975
• Associate –1950 x 60% = 1170
• Technician –1950 x 80% =  1560
• Student –1950 x 90% =  1755
• Total Number of productive hours: 5460 hours

The Cost rates for each staff member applied against projects on Rapport3 will apportion an equal amount of overhead per hour for each staff member.  

Cost Rate Calculation:

Calculation Check:

If you multiply all the fee earning hours for each member of staff by their corresponding cost rate it will total £350,000, the cost of running the business.

Example 3 – Complex Calculation including calculation of overhead factor

Overhead Costs

• Admin staff - £20,000 
• Non-salary overhead - £140,000

Total Cost of the Business: £350,000    

Firstly we will need to calculate the overhead factor of the business:    

Overhead Factor Calculation:

Secondly, we will need to calculate the Base Cost rates for each staff member:    

Base Cost Rate Calculation:

• Director – £75,000 /(1950 x 50%) = £76.92
• Associate – £55,000 / (1950 x 60%) = £47.01
• Technician – £40,000 / (1950 x 80%) = £25.64
• Student – £20,000/ (1950 x 90%) = £11.40

The Cost rates for each staff member applied against projects on Rapport3 will be as follows:    

Cost Rate Calculation:

Calculation Check:

If you multiply all the fee earning hours for each member of staff by their corresponding cost rate it will total £350,000, the cost of running the business.

Maintaining Rates and Overhead Factors

• Project rates can be updated in the Human Resource- project rates tab on an individual basis. This is useful to complete when a new staff member has joined the practice.

• It is possible however to update multiple staff members base cost rates, overtime rates and overhead factor at once via the Control Panel – T/S Rates section. This allows you the flexibility to adjust cost rates as required and even apply them retrospectively for a specified period.

How to Edit existing rates

• Access the Control Panel - T/S Rates window
• Select the Edit Existing Rates option from the Step 1: Choose Mode dropdown list .
• Select the appropriate Branch and Grade from the Step 2: Choose Staff dropdown options to display the details for the selected staff.
• For each staff member that you wish to edit an existing rate, first click on a Start Date (using the calendar pop-up ) and amend as necessary, then edit the existing Cost Rate, O/T Rate and O/H Factor as required.

• Click  to Save.

*Please Note: now you have changed the existing project rates they will not automatically re-calculate the cost of approved timesheets. You must use    
the Timesheet Re-Approve Console to assign the new cost to approved timesheets.    
Please see Timesheet Re-approval.

How to add new cost rates

• Access the Control Panel - T/S Rates window.
• Select the Add New Rates option from the Step 1: Choose Mode dropdown list.
• Select the appropriate Branch and Grade from the Step 2: Choose Staff dropdown options to display the details for the selected staff.
• For each staff member that you wish to add a new rate, first select a New Start Date (using the calendar pop-up ), then enter a New Cost Rate, New O/T    
  Rate and New O/H Factor as required.

• Click  to Save.

*Please Note: This screen contains some useful information on existing data within Rapport3. Please see Comparing Costs for further details.

Timesheet Re-approval

• Access the Control Panel - T/S Re-Approve window:

• Use the Start Week and End Week dropdown options to define the Date Range for the timesheets you wish to re-approve to display the Re-Approve Timesheet Console.
• Check the boxes for all staff whose timesheets you wish to re-approve then click Re- Approve Timesheets button.   

*Please Note: Depending on the number of timesheets being re-approved this process may take some time.

• After processing has been completed the console window will display the results and alert you to any timesheets it was unable to re-approve.

Comparing costs on Rapport3 to the total cost of the business

• It is possible to compare the total cost of your business on Rapport3 with your    
  company accounts. The best place to review this information is in the Control Panel –    
  Timesheet rates section and by selecting the ‘Add new rates’ mode. As follows:

• If you have calculated the total cost of your business and your overhead factors using our suggested methods, you should be able to do a ‘calculations check’ as follows:

• It is necessary to understand how the components of these totals are calculated when drawing comparisons.

T/S Salary

• This column shows the total expected salary of the individual based on their cost rate, scheduled hours and looking across their timesheets over the last 6 months.
  Using the details of John Smith in the previous examples, his T/S salary can be calculated as follows:

• As the Base cost rate and total hours per year are set in the HR section, the only varying factor is the % utilisation Rate. Rapport3 calculates this utilisation % based on time booked against ‘Fee’ projects in the previous 6 months. This eliminates any time booked against Admin or Absence codes.
• If you have the HR module, It is useful to compare the T/S Salary against the Actual Salary column (entered in HR – Benefits tab).

*Please Note: If the is a substantial amount of paid overtime included in the T/S salary, this will increase the number of hours booked against fee projects and as a result will increase the utilisation rate. It is necessary to ensure that these overtime hours are reflected in the figure you are comparing against.

O/H Contribution

• This column shows the individual’s contribution to the overheads of the business and    
  can be calculated as follows:
   

• If there is a significant difference in the Total Cost of the Business calculated by Rapport3 and as per your accounts, It is worth comparing the % utilisation rate calculated by Rapport3 against the rate used for your calculations of base cost rates for each staff member.
• It is possible to update the cost rates and/or overhead factor and reapprove the timesheets retrospectively based on the new calculations. See Timesheet Re- approval.

Maintaining Security Access over Staff Costs

• Questions are often raised about the transparency of these rates and if it is possible for staff members to see individual cost rates across the practice. Due to the nature of Project Costing, it is possible to view these details in certain areas of the system. This enables Project Managers to make informed decisions whilst planning and reviewing their projects. However, if this information is considered sensitive, this information can be restricted by security access for certain groups. See below for details.

Financial Drilldowns

• The Performance Summaries tab allows you to drill down on total costs for the month to show you the breakdown of the staff base cost and their contribution to the overheads.

• By clicking on the underlined figure showing in the ‘Labour cost’ column, the following    
  information will appear.

• It is possible to disable the ability to drilldown to this level of detail by unchecking the    
  ‘View financial drill downs’ within the security console for the specific security group.

Reporting

• The following project report contains information on staff costs:
  • Project Transactions – Labour Costs
• It may be advisable to limit access to these reports to only the security groups that should be privy to this information.

*Please Note: Reports within the HR Module that may contain sensitive information will only be available to the HR security group.

Overtime Rates

• Rapport3 can be set up with a number of timesheet codes as required. We recommend that a maximum of 2 to 3 codes are used as follows:
  • Core
  • Paid Overtime
  • Unpaid Overtime
• Each timesheet code needs to have a project rate associated with it. This rate will then be multiplied by the overhead factor and applied to the project as an actual cost.
• For new starters, it is best to set this up in the Human Resource - Project rates tab. However, if you are making multiple changes to staff records, this is best carried out via the control panel.    

Companies with paid overtime:

• The overtime cost rate will be equal to the base cost rate. All hours will be recorded and costed against the project in the same way. See below.

• If your company pays a higher rate for any overtime worked on projects, this will need to be reflected in the project rates for each staff member. In the following example, the staff member receives double pay for any overtime worked. The cost recorded against this project, will be twice the amount as the core time as it is entered on the timesheets using the overtime code.

Companies with unpaid overtime:

• As overtime is unpaid and not a cost to the business, the project will not receive a cost for this time against the project. Staff will need to be given guidelines on how to decide between the core and unpaid time to see which project receives ‘free’ time as such.

• However, if you would like to book the cost of any overtime worked on a project, it is necessary to set the overtime cost rate equal to the base cost rate. That way, the ‘actual’ time spent on a project will be captured as a cost against the project.

Grade Rates

• Rapport 3 uses grade rather than individual rates for forecasting.
  There are a number of reasons for this;
  • You may not know the individual you will be using when planning for a project.
  • It allows staff to plan projects without knowing the exact rate of other members of staff.
  • For time and expense project it allows grades to be allocated a charge out rate too.
• Each time a new project is created a copy of these rates are made and associated with the project. This ensures each project starts off with a common set of grade rates but allows for changes to be made, on a project-by-project basis, if required.
• Maintaining Grade rates within a project, click on the  icon to open the Project Grade Rates Console. This will allow you to edit/view cost rates and charge out rates.
• If specific rates on a project have been negotiated or the default rates are not applicable to the project you can override them (from which a revised margin percentage is calculated), or vice versa.

Please see details below:

Each column can be explained as follows:

• Live Cost: The average cost rate of all staff members of the selected grade. This rate is based on the employee’s base cost rate multiplied by the overhead factor in the Human Resource – project rates tab. This can be compared against the default cost rates for reasonableness. Essentially these should be very similar and can be used as guidance to set your default cost rates.
• Default Cost: The grade cost rate used for forecasting on all projects by default.
• Plan cost: The grade cost rate used for forecasting on this particular project. These hourly rates should include overhead costs too. These will automatically default to the default cost rate but can be edited on a project by project basis (with sufficient security rights)
• Default Charge: The current charge rate used for forecasting on all projects by default.
• Plan Charge: The grade charge rate used for forecasting on this particular project. These will automatically default to the default charge rate but can be edited on a project by project basis (with sufficient security rights).These are used for time and expense projects and can change if agreed with the client.
• Profit Margin: The Profit margin is the difference between the cost and charge rate. If you edit this this profit margin %, it will automatically update the plan charge rate accordingly.

Editing Default Grade Rates

The actual default rates can be edited by accessing the Control Panel – Projects:

Grade Rate Bulk Update

• Go to Control Panel > Projects > Grade Rates Bulk Update tool. This allows you to select a group of projects and bulk apply the latest default grade rates:

• Use the existing filter to identify a list of candidate projects. The existing filter means that you can apply precise search criteria, such as branch, client, or registration date. Add the projects you want to update to the shortlisted projects.
• Get the next batch and click to process the rates on this batch of projects. Rates and labour budget plans will be updated for each project. This is an intensive process and batching ensures that the load on the system is managed, to avoid disruption to other users.
  There are two options when applying default grade rates:
  • Replace the most recent grade card on each project. This will apply the default grade rates only to the most recent set of rates on a project (e.g., the set with no end date).
  • Create a new grade card for each project. If this option is selected, you will be   
    prompted for a start month

• This will set an end date for the previous set of rates (in this case April 2018) and create a new set using the current default rates (in this example from May 2018). Please note that any future dated grade cards on the project will be removed and replaced by the new set. E.g.:

• In either mode, any new default grade rates for the branch will be added to the project.