The Utilization Rate is the rate at which you utilize the total available time of your resources. It measures the productivity levels of your employees and can be a great helping hand in doing capacity planning and forecasting resource demand. In Forecast’s Utilization report, we distinguish between two types of utilization – billable utilization and resource utilization.
Billable utilization rate
Billable utilization measures how much of their total available time your employees spend on project-related activities. It’s a percentage scale from 0 – 100%. The formula for billable utilization is:
(Total Registered Billable Hours / Total Hours Available)* 100.
Factoring in only billable hours, the ideal billable utilization rate is usually set at around 80%. This limitation is caused by natural necessities, including internal meetings, training, and other non-billable activities.
Agencies, consultancies, software businesses, and other professional organizations delivering services use billable hours to tie work back to their clients and invoice them accordingly. Company-wide billable utilization is also an indicator of how operationally efficient the business is.
Resource utilization rate
In turn, resource utilization is a general business metric to track the daily productivity of your employees, which includes both billable and internal time.
The formula for calculating resource utilization is:
(Total Registered Hours / Total Hours Available)* 100.
If you’re measuring daily, weekly, or monthly resource utilization, the ideal rate to target would be 100%.
Overall resource utilization can reveal trends about the company’s overall productivity, inform your hiring strategy, and shed light on over- or underload. When the individual utilization rate is too high, it means the team member’s workload is too high, while their skill set is in high demand.
Having a healthy utilization rate is often the result of good scheduling practices. Check out our full guide to resource utilization here. A resource scheduling tool is often used for this purpose as well.