Understanding Internal Hourly Cost

Internal Hourly Cost (IHC) refers to the hourly rate or salary allocated to each individual team member. It’s used to calculate the cost component of a project’s budget, including Baseline work estimates. Admins are responsible for managing the IHC for all team members.

This article covers:

• Who can access Internal Hourly Cost?
• Adding an Internal Hourly Cost
• Using Internal Cost Periods
• Understanding Internal Hourly Cost Settings in Projects

Who can access Internal Hourly Cost?

Internal Hourly Cost (IHC) is managed by Admins. Depending on their permissions, non-Admin users may have visibility into the IHC of team members within their assigned projects.

Controllers, or users with custom permission profiles that have View financial information enabled, can view team member IHC within their assigned projects by navigating to Financials > Rates & Internal Costs within the project. 

Adding an internal hourly cost

Admins set the internal hourly cost for team members from the Resources page of the Admin panel.  

To set an internal hourly cost

1. Click Admin in the navigation bar.
2. Select Resources from the dropdown.
3. Click People.
4. Find the Internal Hourly Cost column.
5. Click on the internal hourly cost value for a team member.
6. In Internal cost periods, click on the $0 and enter the internal hourly cost of the team member.
7. Click "+".
8. The cost is added. 
9. Click Close to exit the modal. 
   

Using Internal Cost Periods

IHC is subject to change when a team member receives a raise or promotion. By using internal cost periods, Admins can preserve the historical IHC of each team member while accounting for future rate increases or changes.

To use internal cost periods

1. Click Admin in the top bar. 
2. Select Resources from the dropdown.
3. Click People.
4. Find the Internal Hourly Cost column.
5. Click on the internal hourly cost value for the team member.
6. In Internal cost periods:
   1. Enter the effective date of the cost rate in Start Date.
   2. Enter the rate in Cost. 
7. Click "+".
8. The new internal hourly cost rate appears at the bottom of the list.
9. Click Close to exit the modal. 
   

Understanding Internal Hourly Cost Settings in Projects

In a project, billable hourly rates are used to calculate revenue, while Internal Hourly Cost (IHC) is used to calculate cost. Project cost is determined by multiplying the IHC of each assigned team member by the estimated hours on their tasks.

If a project contains unassigned tasks, it's up to the Project Manager to decide how the IHC should be calculated. 

The Internal Hourly Cost Calculation setting is available to Admins and users with access to financials. With standard permission profiles, this includes Controllers. For custom profiles, users must have View financial information permissions.

What is Internal Hourly Cost Calculation?

There are three options available in a project's Settings > Financials > Internal Hourly Cost Calculation.

• Company Averages: Company averages is based on the cost of everybody who has the same role in the company.
• Project Team Averages: Project Team averages is based on the average on the roles of the assigned team. This is a more precise calculation, however you need to have the team already assigned to the project.
• Set a fixed internal hourly cost: Fixed internal hourly cost is a manually input hourly cost rate for the project for all team members. If your company manages projects in various currencies, you can opt to set the fixed internal hourly cost in either project or company currency.

To set a project's Internal Hourly Cost Calculation

1. Open the project in question. 
2. Click Settings in the left side panel. 
3. Click Financials. 
   
4. Scroll down to Internal Hourly Cost Calculation.
5. Determine the best calculation for your project and toggle the option.
   
   

If a project uses a currency different from the company’s default currency, the Fixed Internal Hourly Cost option will display two fields: Company Currency and Project Currency.

• If you enter a fixed internal cost in Company Currency, the Project Currency value will be calculated using the exchange rate set in the Admin panel’s Financials settings.
• If you enter a fixed internal cost in Project Currency, the Company Currency value will be calculated using the same exchange rate.

Related articles

• Setting up and reviewing project Baseline
• Reviewing your Project Financials
• Permissions: How they work