Interact HRMS Labor Costing & Billing Management Module Overview

The Interact HRMS Labor Costing & Billing Management module offers a sophisticated solution for calculating labor costs, overheads, and billing rates to ensure accurate costing and profitability analysis. This module provides organizations with the tools needed to calculate Direct Labor Cost, Labor Burden Cost, and Overheads for each employee, taking into account various factors such as allowances, benefits, and taxes. By enabling accurate calculation of Fully Loaded Cost or Labor Burden Cost per Hour, the module supports organizations in setting precise billing rates that reflect the true cost of labor, ensuring that employees contribute profitably to the company.

This module is particularly beneficial for organizations that need detailed labor cost insights, such as consulting firms, service providers, or project-based businesses. With configurable cost variables, support for multiple calculation methods, and integration with employee data, the Labor Costing & Billing Management module provides a comprehensive solution for cost control, budget planning, and profitability analysis.

Defining Labor Cost Calculation Methods

The module allows HR and finance teams to configure labor cost calculation methods according to specific organizational needs. Organizations can choose to calculate labor costs by Employee Group, Contract Type, or Job Group, allowing flexibility in determining the basis for labor cost calculations. This flexibility ensures that cost calculations align with the organizational structure and employee roles, providing more accurate and relevant results.

For example, organizations may choose to calculate labor costs by job group to differentiate between skilled labor and administrative roles. By defining the calculation method, organizations can ensure that labor costs are allocated accurately based on employee classification, supporting precise budget planning and cost management.

Direct Labor Cost Calculation

The module provides a detailed framework for calculating Direct Labor Cost, which includes basic salary, allowances, and any additional earnings related to an employee’s role. The setup screen allows HR teams to specify allowances and earnings that contribute to the direct labor cost, such as Family Allowance, Transportation Allowance, or Hazardous Work Pay. These options enable organizations to customize direct labor cost calculations based on specific employee compensation elements.

Direct labor cost calculation methods include the option to use Annual Base Salary or other variables such as Allowance Factors and Earnings Adjustments. By configuring these options, organizations can ensure that direct labor costs are calculated accurately and in accordance with individual compensation packages.

Labor Burden Cost Calculation

The module also supports the calculation of Labor Burden Cost, which includes costs associated with employee benefits, insurance, and taxes. HR teams can define which benefits contribute to the labor burden, such as Health Insurance, Profit Sharing Plan, or End of Service Gratuity. Additionally, taxes associated with employee compensation can be included in the labor burden calculation, ensuring that the full cost of employment is accounted for.

Users can select specific benefits and taxes that apply to each employee, enabling a comprehensive view of labor burden costs. This feature is especially useful for organizations that provide extensive benefits or operate in regions with high tax burdens, as it ensures that these costs are accurately incorporated into labor calculations.

Overhead Cost Variables and Calculation Method

The module includes functionality for calculating Overhead Costs, which can be defined as a percentage of direct labor costs or set using an Overhead Cost Factor. Overhead costs encompass general expenses related to employee support, such as administrative expenses, facility costs, and other non-direct costs that contribute to the overall cost of labor. By including overhead costs in labor calculations, organizations can gain a complete view of the total expenses associated with each employee.

For example, organizations can configure overhead costs as a percentage of the direct labor cost or use a specific overhead factor to account for additional expenses. This flexibility allows organizations to tailor overhead calculations based on operational needs, ensuring that all relevant expenses are considered in labor cost analysis.

Yearly Production Hours Calculation

Accurate labor costing requires a clear understanding of Yearly Production Hours, which represent the total available working hours for an employee within a year. The module provides multiple options for calculating production hours, including Total Normal Work Hours Per Year and Total Normal Work Hours Minus Public Holidays and Paid Leave Hours. This flexibility allows organizations to account for non-working time, such as holidays or vacation, ensuring that hourly rates are calculated based on actual production capacity.

For instance, if an organization has 2,000 working hours per year after accounting for holidays and leave, this figure can be used in labor cost calculations to determine hourly rates. This calculation supports accurate billing and ensures that labor costs are spread over realistic working hours, contributing to precise cost and billing analysis.

Flexible Calculation Methods for Hourly and Billing Rates

The Labor Costing & Billing Management module offers multiple calculation methods for determining labor cost per hour and billing rates. Key options include:

• Direct Labor Cost / Production Hours: Divides the direct labor cost by the total production hours to calculate hourly labor cost.
• Fully Loaded Cost: Calculates labor cost per hour based on the sum of direct labor cost, labor burden cost, and overheads, divided by production hours.
• Billing Rate Factor: Applies a billing rate factor to the labor cost to determine the final billing rate per hour or per project.

These flexible calculation methods ensure that organizations can set billing rates that accurately reflect labor costs, supporting profitability analysis and cost recovery. The billing rate factor allows for adjustments to meet target profit margins, ensuring that employees are billed at a rate that covers both costs and desired revenue.

Direct Labor Cost and Billing Rate Variables

The module allows users to select specific variables for inclusion in labor cost and billing rate calculations. Users can choose from a range of options, including:

• Allowances and Earnings: Includes specific allowances and earnings relevant to labor cost.
• Benefits and Taxes: Adds benefit costs and tax amounts to the calculation.
• Basic Salary Adjustments: Allows adjustments to the base salary based on job-specific requirements.

By customizing the variables included in each calculation, organizations can ensure that labor cost and billing rate calculations align with the specific elements of each employee’s compensation package, providing a more accurate picture of labor expenses and profitability.

Automated Invoice Generation for Labor Billing

The module includes an option for automated or manual invoice generation based on labor costs, making it easier for organizations to bill clients for services. When automated invoicing is enabled, the module generates invoices based on the calculated labor billing rates, ensuring that all labor costs are accurately reflected in client billing. This feature supports efficient invoicing processes and ensures timely cost recovery for billed services.

For example, consulting firms can use this feature to generate invoices based on hours worked by consultants, with billing rates calculated automatically using predefined factors. This automation reduces manual effort in billing and ensures that clients are billed accurately based on actual labor costs.

Real-Time Tracking and Reporting for Labor Costs

The Labor Costing & Billing Management module includes reporting capabilities that allow organizations to track labor costs in real-time. Reports can be generated to view direct labor costs, labor burden costs, overheads, and total billing amounts by employee, project, or department. These insights support data-driven decision-making, helping organizations optimize labor cost allocation and ensure profitability.

For instance, finance teams can generate reports to analyze the labor cost of specific departments or projects, helping them assess whether billing rates cover all costs and contribute to profitability. Real-time reporting enables ongoing cost monitoring and provides transparency into the financial impact of labor expenses.

Summary: Interact HRMS Labor Costing & Billing Management

The Interact HRMS Labor Costing & Billing Management module offers organizations a comprehensive solution for calculating labor costs, overheads, and billing rates with precision. Key benefits include:

1. Customizable Labor Cost Calculation: Define labor cost calculation methods by employee group, contract type, or job group for flexibility.
2. Direct Labor Cost Calculation: Include allowances, earnings, and adjustments to calculate direct labor costs accurately.
3. Labor Burden Cost Calculation: Account for benefits, insurance, and taxes in labor cost calculations.
4. Overhead Cost Calculation: Include overheads based on percentage or specific cost factors for a complete cost view.
5. Yearly Production Hours Calculation: Calculate production hours accurately to support hourly rate calculations.
6. Flexible Hourly and Billing Rate Calculation: Choose from multiple calculation methods to set labor cost per hour and billing rates.
7. Direct Cost and Billing Rate Variables: Customize variables for cost and billing calculations to align with compensation components.
8. Automated Invoicing: Generate invoices based on labor costs for streamlined billing.
9. Real-Time Tracking and Reporting: Generate reports to monitor labor costs and analyze profitability.

By combining these features, the Labor Costing & Billing Management module enables organizations to manage labor costs effectively, set accurate billing rates, and ensure that each employee contributes profitably to the organization. This structured approach supports cost control, improves transparency, and enhances profitability analysis, helping organizations make informed financial decisions regarding labor expenses.