Overhead Calculation

Overhead — sometimes referred to as overhead labor — represents the indirect cost of labor applied to a project, on top of direct labor. It's calculated as:

Direct Labor × Overhead Factor = Overhead Cost

How Overhead Factor Is Applied

Your firm's current Overhead Factor is stamped onto each new time slip at the moment it's created. That stamped factor is then multiplied by the time slip's Direct Labor to calculate the overhead cost for that time slip.

Because the Overhead Factor is stamped at creation, a time slip retains the factor that was in effect when the time was recorded — even if your firm's Overhead Factor changes later. This keeps historical overhead calculations accurate to the period the work was actually performed, rather than retroactively applying a newer rate.

Rolling Up Overhead

Overhead is calculated at the time slip level, then summed upward:

• Time Slip Overhead = Direct Labor × Overhead Factor
• Phase Overhead = sum of all linked time slip overhead costs for that phase
• Project Overhead = sum of all Phase Overhead across the project

Why It Matters

Overhead Cost is a key input to other calculations — most notably Fee Burn, which adds Direct Labor and Overhead together before applying your Target Profit Percentage. Getting Overhead Factor right (and keeping it current) directly affects how accurately Fee Burn, and ultimately profitability, is measured across your projects.

Best Practice

Review and update your firm's Overhead Factor periodically — typically as part of your annual budgeting or after significant changes to overhead expenses or payroll. Since the factor is stamped on each time slip at creation, updating it going forward won't affect historical time slips, so it's worth reviewing on a regular cadence rather than waiting until the number is significantly out of date.

Summary

Overhead Cost is calculated as Direct Labor × Overhead Factor, with the factor stamped on each time slip when it's created. Time slip overhead sums to phase overhead, which sums to project overhead. This figure feeds directly into Fee Burn and other profitability calculations.