Understanding how to calculate utilization rates is essential for professional services firms, agencies, and project management teams. The utilization rate is a key performance indicator (KPI) that measures the percentage of an employee's available time that is used for billable or productive work.
A healthy utilization rate ensures that a company is maximizing its revenue potential without burning out its workforce. If rates are too low, the company may not be profitable. If they are too high (consistently above 90-95%), employees may suffer from burnout, leading to turnover.
Utilization Rate = (Total Billable Hours / Total Available Capacity) × 100
Step-by-Step Calculation Formula
To calculate the utilization rate manually, follow these specific steps:
Determine the Total Capacity: Calculate the total number of working hours available in the chosen period (e.g., a month). This is usually the number of working days multiplied by the standard daily hours (e.g., 20 days × 8 hours = 160 hours).
Subtract Non-Working Time: Deduct any holidays, vacation days, or sick leave to get the Net Available Capacity.
Sum Billable Hours: Tally up the total hours the employee spent on revenue-generating client work during that period.
Divide and Multiply: Divide the Billable Hours by the Net Available Capacity and multiply by 100 to get the percentage.
Example Scenario
Consider a graphic designer working at an agency for the month of September:
Working Days: 21 days
Daily Hours: 8 hours
Total Capacity: 168 hours
Time Off: 8 hours (1 day vacation)
Net Capacity: 160 hours
Billable Hours Logged: 120 hours
The calculation would be: (120 / 160) × 100 = 75%.
A 75% utilization rate is generally considered a healthy target for production-level employees in many service industries.
Capacity vs. Billable Utilization
It is important to distinguish between Capacity Utilization (how much of the total theoretical time is used) and Billable Utilization (how much of the time is charged to clients). The calculator above focuses on resource utilization based on the net capacity available after time off.
What is an Ideal Utilization Rate?
There is no single "correct" number, but industry standards often suggest:
60% – 80%: Common target for individual contributors and production staff. This leaves time for administration, training, and internal meetings.
Below 50%: May indicate overstaffing or a lack of incoming work.
Above 90%: While profitable in the short term, this is unsustainable and often leads to quality issues and attrition.
function calculateUtilization() {
// 1. Get Inputs
var periodDays = parseFloat(document.getElementById('periodDays').value);
var dailyHours = parseFloat(document.getElementById('dailyHours').value);
var timeOff = parseFloat(document.getElementById('timeOff').value);
var billableHours = parseFloat(document.getElementById('billableHours').value);
// 2. Validate Inputs
if (isNaN(periodDays) || isNaN(dailyHours) || isNaN(billableHours)) {
alert("Please enter valid numbers for days and hours.");
return;
}
if (isNaN(timeOff)) {
timeOff = 0;
}
// 3. Calculate Core Metrics
// Gross Capacity is strictly Working Days * Daily Hours
var grossCapacity = periodDays * dailyHours;
// Net Capacity is Gross Capacity minus Time Off
var netCapacity = grossCapacity – timeOff;
// Prevent division by zero
if (netCapacity 90) {
bar.style.backgroundColor = "#dc3545"; // Red (Burnout risk)
} else if (utilizationRate < 50) {
bar.style.backgroundColor = "#ffc107"; // Yellow (Underutilized)
} else {
bar.style.backgroundColor = "#28a745"; // Green (Healthy)
}
}