Topaz Publications Blog

What is the true cost of a labor hour? Let’s start with salary. Maybe the average tech writer in your organization makes a little over $60,000 a year. For convenience, we’ll say it rolls out to $30 an hour. In order to get to the number some companies call “total cost” (it isn’t), you need to multiply the direct labor cost by a number that represents additional costs such as employee benefits, vacation, and holidays, along with overhead costs such as facility rent, liability insurance, workers comp, etc. Companies generally use a multiplier between 2.5 and 4 to get to the total cost level. We’ll use 3. So now our $30 an hour just became $90. But that’s not all. On top of this number, companies will generally layer G & A (general and administrative) cost and profit. Let’s say G & A is 10% and profit is 15%. That brings us to $113.85 per hour (90 x 1.1 = 99; 99 x 1.15 = $113.85)

When you’re running out the numbers, don’t forget that there are 52.1667 weeks in a year and 4.3 weeks in a month. Don’t short yourself by rounding these numbers down.

Keep an accurate record of the labor hours and material costs you invest in every job. Sooner or later, you will have a basis for parametric (bigger than a breadbox) cost estimating. (Gadget A cost x and Gadget B looks to be about 10% bigger than Gadget A. Therefore the cost of Gadget B should be about 1.1x. This method is easy to do, easy to revise, and easy to defend. Even a big job can be costed in minutes using this method.

Bottoms-up costing – how many pages, how many hours or minutes per page for each labor category, etc – is no more accurate; it just looks accurate because it takes so much calculating to get to the bottom line. The fact is that your page counts, productivity rates, and labor rates are all just guesses, anyway. Any manager worth his or her salt can poke holes in this type of estimate. The first question you hear will be: “Where’s the empirical data that supports these productivity rates?” Moreover, even if you’re using a spreadsheet program, last-minute revisions to a bottoms-up estimate can result in some long workdays.