Utilization Rate staffing

What does utilization rate mean in terms of staffing? Why would I choose an employee with a higher vs low utilization rate for a project? I understand it’s calculated with billable over total number of hours worked.

You should assign new tasks to employee with lower utilization rate as they’ll have to increase they direct labor expenses and being more profitable… Low utilization rate means low charging rate and more overhead rate ( more burden to the office financial system).

It’s the opposite, TDL / TL = billable hours / total labor.

1 Like

Thanks @potoczakhalle for the question and @haythammohamed_abdelrahman for the response!

@haythammohamed_abdelrahman is on the right track - for the purposes of the ARE, you should seek to increase employee’s utilization rates by assigning new work to employees with low utilization rates. These low-utilization rate employees are spending a greater portion of their time on non-billable tasks - office administration, RFP responses, etc. By assigning them billable work, their total billable hours increases, and the firm can make more money.

Just want to clarify that low utilization rate does not mean low charging rate (I think you mean billable rate by that) - On the contrary, if your office has a low utilization rate, you’d end up with higher than average billable rates because you need to charge more for your billable hours to make up for all of the non-billable time spent.

1 Like