This article explains how Magnifi calculates the Unit Cost per hour — the total operating cost for every hour that is charged.
It also shows how to interpret and compare Unit Cost against the Sell Rate to determine margin and efficiency.
Use this guide when you want to:
• Analyse the cost per charged hour for each employee or division.
• Review the components that make up total labour and overhead cost.
• Compare cost per hour to Sell Rate to determine margin and profitability.
• Understand how Actuals or Budgets affect the calculation basis.
The Unit Cost per hour includes:
• Labour Cost – all employee wage, overtime, and on-cost components.
• Overhead Cost – the portion of business overheads allocated to labour.
If Actuals are visible in Profit and Loss Projection, the calculation includes year-to-date Actual Results plus future projections.
If you prefer the calculation based on Budgets only, remove the Show Actuals To month under Projections → Profit and Loss.
Labour Cost per Hour represents the total labour cost for every hour charged.
Calculate total base labour cost per hour, including:
standard wages
overtime rates
on-costs (e.g., superannuation, payroll tax)
Divide by Available Hours % to include the impact of leave entitlements.
Divide by Productivity % to determine the cost per productive hour.
Divide by Recovery % to determine the cost per hour charged.
When overtime applies:
Calculate the overtime cost per hour using the standard rate × overtime multiplier (set under Labour Drivers). On-costs are added automatically.
Superannuation does not apply to overtime by default but can be switched on under Labour Drivers → Gross Wages if required.
Divide by Productivity % to determine the cost per productive hour.
Divide by Recovery % to determine the cost per charged hour.
💡 Tip: Hover over the Labour Cost $ value in Magnifi to view the full calculation per employee.
To view the breakdown, click the Overhead Cost hyperlink.
Start with Total Overhead Costs.
Subtract income items not flagged as Capacity Building.
The result is Net Overheads — the portion of overheads funded by labour.
Divide Net Overheads by total projected billable hours.
The resulting Overhead Cost per Hour is applied consistently to all employees.
If contractors are set up as Employees and you want their hours included in Total Hours:
Go to Capacity → Capacity Defaults → Include Contractor Hours
Why does my cost per billable hour seem higher than the base labour cost?
Because non-productive and unrecovered hours reduce the number of hours available to recover the same employment cost.
The cost isn’t higher — it’s spread across fewer chargeable hours.
Does overtime inflate all labour costs?
Overtime is added only where overtime hours exist. The overtime rate (including any on-costs) is shown separately so accountants can verify the calculation.
Can I use organisation-wide productivity instead of individual percentages?
Yes. You can choose to calculate cost per charged hour using either employee or organisation productivity %.
Organisation productivity helps smooth results when utilisation varies between employees.
Can I view the detailed calculation?
Yes. Hover over the Labour Cost $ value or click the Overhead Cost hyperlink to view the detailed breakdown per employee.