Labour Recovery Rate Calculation

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Labour Recovery Rate Calculator

Results Summary

Labour Recovery Efficiency: 0%
Total Labour Cost: $0.00
Total Revenue Generated: $0.00
Revenue per Paid Hour: $0.00
Unrecovered Labour Cost: $0.00
function calculateRecoveryRate() { var totalPaidHours = parseFloat(document.getElementById('totalPaidHours').value); var billableHours = parseFloat(document.getElementById('billableHours').value); var hourlyPayRate = parseFloat(document.getElementById('hourlyPayRate').value); var hourlyBillRate = parseFloat(document.getElementById('hourlyBillRate').value); if (isNaN(totalPaidHours) || isNaN(billableHours) || isNaN(hourlyPayRate) || isNaN(hourlyBillRate) || totalPaidHours 0 ? unrecoveredHours * hourlyPayRate : 0; document.getElementById('recoveryPercent').innerText = recoveryPercent.toFixed(2) + '%'; document.getElementById('totalCost').innerText = '$' + totalCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('totalRevenue').innerText = '$' + totalRevenue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('revPerPaidHour').innerText = '$' + revPerPaidHour.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('unrecoveredCost').innerText = '$' + unrecoveredCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resultsArea').style.display = 'block'; }

Understanding Labour Recovery Rate

The Labour Recovery Rate is a critical performance indicator (KPI) used primarily in service-based industries, trades, and professional firms. It measures the efficiency with which a business converts paid employee time into billable revenue. If you pay an employee for 40 hours a week but can only bill 30 of those hours to clients, your recovery rate is 75%.

The Importance of Measuring Recovery

High recovery rates indicate that your operations are lean and your staff is productive. Low recovery rates often signal underlying issues such as:

  • Excessive Administrative Burden: Employees spending too much time on paperwork or internal meetings.
  • Travel Time: In field services, excessive travel between jobs that isn't billed to the client.
  • Scope Creep: Working on client tasks that were not included in the original quote or contract.
  • Training & Downtime: Necessary but non-revenue generating activities.

How to Calculate Labour Recovery Rate

The core formula is straightforward:

Labour Recovery Rate (%) = (Total Billable Hours / Total Paid Hours) x 100

To understand the financial impact, you should also calculate the Unrecovered Cost. This is the amount of salary you paid for hours that did not generate revenue. Reducing this number directly increases your bottom-line profit.

A Practical Example

Consider an HVAC technician who is paid for a 40-hour work week at $40/hour. Total payroll cost for the week is $1,600. During that week, the technician completes jobs totaling 32 billable hours at a rate of $120/hour.

  • Recovery Rate: (32 / 40) = 80%
  • Total Revenue: 32 x $120 = $3,840
  • Unrecovered Labour Cost: 8 non-billable hours x $40 = $320
  • Revenue per Paid Hour: $3,840 / 40 = $96/hour

By tracking these metrics weekly, business owners can identify trends. If the recovery rate drops to 60%, the owner knows they need to investigate whether it's a scheduling issue, a lack of work, or inefficiency in the field.

Strategies to Improve Your Rate

To boost your recovery rate, consider implementing the following strategies:

  1. Optimize Scheduling: Use GPS and routing software to minimize unbillable travel time.
  2. Automate Admin: Reduce the time staff spends on manual data entry or reporting.
  3. Review "Free" Work: Ensure all work performed for clients is documented and billed according to the contract.
  4. Standardize Processes: Create checklists to ensure jobs are done right the first time, reducing unbillable "re-work" hours.

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