overtime calculations

[Confused]

I am using Project Standard 2003. I have salaried employees that work
overtime on tasks, and I do not want Project to calculate a cost associated
with those hours, nor do I want Project to shift the schedule when I add
overtime hours. Is this possible?

 

[JulieS]

Hello Confused,

Project will only calculate overtime costs in situations where you have
put an overtime rate in for the resource(s) assigned to overtime work.
If you wish the overtime work to be "free" you may leave the overtime
rate field blank (set to $0.00 by default). However, leaving overtime
rate set to zero and assigning significant amounts of overtime is going
to skew the relationship between total work and total cost. I usually
suggest setting the overtime rate equal to the straight time rate for
salaried employees. Yes, you don't pay them more for working 50 hours
per week, but many companies do accrue costs for "extra" hours through
compensatory time.

As far as Project not shifting the schedule -- I'm afraid that is what
overtime does -- it drops the duration of tasks because the overtime
work assigned during nonworking time as defined in the calendar.

I'm not sure I understand what you are trying to accomplish by assigning
overtime but not having the schedule change. Perhaps a few more details
would help us help you.

I hope this helps. Let us know how you get along.

Julie
Project MVP

Visit http://project.mvps.org/ for the FAQs and additional information
about Microsoft Project

 

[Confused]

JulieS:

Thanks for your reply. I guess I am trying to figure out how this works. I
set up a "test file" with one resource at a salaried rate of $10,000, using
the standard calendar. I assigned that resource to a 1 day task, and as
expected the cost of that task was calculated at $38.46. If I follow help
instructions and assign overtime hours to that task (task usage, insert
Overtime Work column), and assign 4 hours of overtime work for that resource
on that task, Project recalculates the duration to .05d, and cuts the project
costs in half ($19.23). So if I want to collect "extra" hours worked on a
task (this task really took 12 hours in one day) for which I am not "paying"
hard dollars, how do I do that?

Just to let you know, I am not managing this way, just need to know for
those situations that arise where people do work extra hours (1 or 2) and I
want to track those in order to make a better estimate the next time....
--
Thanks.
Confused

Hello Confused,

Project will only calculate overtime costs in situations where you have
put an overtime rate in for the resource(s) assigned to overtime work.
If you wish the overtime work to be "free" you may leave the overtime
rate field blank (set to $0.00 by default). However, leaving overtime
rate set to zero and assigning significant amounts of overtime is going
to skew the relationship between total work and total cost. I usually
suggest setting the overtime rate equal to the straight time rate for
salaried employees. Yes, you don't pay them more for working 50 hours
per week, but many companies do accrue costs for "extra" hours through
compensatory time.

As far as Project not shifting the schedule -- I'm afraid that is what
overtime does -- it drops the duration of tasks because the overtime
work assigned during nonworking time as defined in the calendar.

I'm not sure I understand what you are trying to accomplish by assigning
overtime but not having the schedule change. Perhaps a few more details
would help us help you.

I hope this helps. Let us know how you get along.

Julie
Project MVP

Visit http://project.mvps.org/ for the FAQs and additional information
about Microsoft Project

 

[JulieS]

Hi Confused,

Sorry for the delay in replying.

When you assigned the resource, Project calculated 8 hours of work at
$10,000 per year or $4.81 per hour. The cost for all 8 hours was being
calculated at $4.81 per hour. When you assigned 4 hours of overtime,
the total amount of work on the task is still 8 hours, but 4 of the 8
hours are now in overtime and are "free". To have a total of 12 hours
on the task (8 at standard rate and 4 at overtime rate), increase the
Work value to 12 hours. Project should retain the 4 hours of overtime
plus 8 hours "regular" and increase the duration back to 1 day. This is
essentially "planned" overtime -- I have created a task with a total of
12 hours of work but expect the resource to get it done in 1 day --
which by default to Project is 8 hours. The cost will increase to
$38.46 again.

You comment that you are trying to keep track of those extra hours
(overtime) that people spend on a task, but I am assuming that extra
time is not planned overtime. If you want to track the actual overtime
that people spend, add the Actual Overtime Work in addition to the
Actual Work field to the timescaled portion (right side) of the Task
Usage view. (Format > Detail styles). Then if a resource works 10
hours total (8 regular and 2 overtime), record 8 hours in Actual Work, 2
Hours overtime. The total Actual Work will update to 10 hours, but
assuming you have left the overtime rate at zero, you are only "paying"
for 8 hours.

I hope this helps. Let us know how you get along.

Julie
Project MVP

Visit http://project.mvps.org/ for the FAQs and additional information
about Microsoft Project

JulieS:

Thanks for your reply. I guess I am trying to figure out how this
works. I
set up a "test file" with one resource at a salaried rate of $10,000,
using
the standard calendar. I assigned that resource to a 1 day task, and
as
expected the cost of that task was calculated at $38.46. If I follow
help
instructions and assign overtime hours to that task (task usage,
insert
Overtime Work column), and assign 4 hours of overtime work for that
resource
on that task, Project recalculates the duration to .05d, and cuts the
project
costs in half ($19.23). So if I want to collect "extra" hours worked
on a
task (this task really took 12 hours in one day) for which I am not
"paying"
hard dollars, how do I do that?

Just to let you know, I am not managing this way, just need to know
for
those situations that arise where people do work extra hours (1 or 2)
and I
want to track those in order to make a better estimate the next
time....

 

[Steve House]

Nobody works for free and just because you don't pay a manager for overtime,
that doesn't mean those hours of the task don't have a cost associated with
them. If nothing else, the fact he is doing *that* task and not something
else that he could be doing instead during that time represents a very real
opportunity cost that must be accounted for. The fact that some otherwise
economically productive task didn't get done because he was tied up doing
the first one means you've lost the economic benefit that would have
otherwise been obtained by un-done task and that is a cost that is part of
the cost of doing the project. Project considers standard rate work to be
that done during the normal working time calendar while overtime work is
work done at any time other than the normal working time calendar. For a
salaried exempt worker who normally works 8 to 5, for example, I suggest
that the real cost of an hour of his work is the same regardless of whether
that hour is between 9 and 10 am, 2 and 3 pm, or between 7 and 8 pm. That
being the case, the overtime rate is NOT zero but rather the same as the
standard rate.

Here's the example I use to illustrate that point:

Project computes the duration of a task as the number of working time units
between start and finish ... ie, only time spent during the working time
calendar counts as duration. The cost of a task is the hours spent during
working time * hourly standard rate + hours overtime * overtime rate.

Consider a 5 day duration task starting Monday at 8am, ending Friday 5pm.
Duration is 40 hours. Work is 40 hours. Work is being done by an exempt
resource who gets $10 per hour. Cost is 40*10 = $400.

You need the task done sooner so you ask the resource to give you at total
of 8 hours of overtime sometime during the task's lifespan. Work required
is still 40 hours but now it's 32 hours inside the calendar and 8 hours
outside the calendar. Duration is based on the 32 hours inside the calendar
only so it drops to 32 hours and the task ends Thursday, just what you'd
needed. Cost though is a problem. If you say the OT rate is zero, cost is
32h * $10/h + 8h * 0/h or $320. But that simply doesn't make any sense at
all - assigning OT should result in the cost either staying the same or
going up, but NOT going down. Carry it to the extreme - low on budget?
Assign ALL the project work in overtime and get it done for free! Not very
likely! So I suggest OT rate for exempt employees be equal to the standard
rate while for non-exempt employees it should be either the statutory
amount, typically time-and-a-half, or whatever a governing collective
bargaining agreement calls for. Now the cost of doing the task in question
gets computed as 32h * $10/h + 8h * $10/h or $400, just as before which is
an accurate estimate of what that task is really costing your firm.

Remember, Project DOES NOT calculate payroll cost and IMHO shouldn't be used
as such, it estimates economic costs of doing the project, ie, the
effectiveness with which the firm's assets are being utilized, which is a
totally different thing altogether. An available hour of the employee's
time is an economic asset of the firm. It's either worth the same amount
regardless of the time of day in which it is done or it's worth more outside
of the work schedule than it is inside the work schedule. But it's never
free.

 

[Confused]

WOW! Thanks so much for your opinion on OT. I will definitely pass this
along to upper management to hep them get their minds wrapped around the
bigger picture.
--
Thanks.
Confused

Nobody works for free and just because you don't pay a manager for overtime,
that doesn't mean those hours of the task don't have a cost associated with
them. If nothing else, the fact he is doing *that* task and not something
else that he could be doing instead during that time represents a very real
opportunity cost that must be accounted for. The fact that some otherwise
economically productive task didn't get done because he was tied up doing
the first one means you've lost the economic benefit that would have
otherwise been obtained by un-done task and that is a cost that is part of
the cost of doing the project. Project considers standard rate work to be
that done during the normal working time calendar while overtime work is
work done at any time other than the normal working time calendar. For a
salaried exempt worker who normally works 8 to 5, for example, I suggest
that the real cost of an hour of his work is the same regardless of whether
that hour is between 9 and 10 am, 2 and 3 pm, or between 7 and 8 pm. That
being the case, the overtime rate is NOT zero but rather the same as the
standard rate.

Here's the example I use to illustrate that point:

Project computes the duration of a task as the number of working time units
between start and finish ... ie, only time spent during the working time
calendar counts as duration. The cost of a task is the hours spent during
working time * hourly standard rate + hours overtime * overtime rate.

Consider a 5 day duration task starting Monday at 8am, ending Friday 5pm.
Duration is 40 hours. Work is 40 hours. Work is being done by an exempt
resource who gets $10 per hour. Cost is 40*10 = $400.

You need the task done sooner so you ask the resource to give you at total
of 8 hours of overtime sometime during the task's lifespan. Work required
is still 40 hours but now it's 32 hours inside the calendar and 8 hours
outside the calendar. Duration is based on the 32 hours inside the calendar
only so it drops to 32 hours and the task ends Thursday, just what you'd
needed. Cost though is a problem. If you say the OT rate is zero, cost is
32h * $10/h + 8h * 0/h or $320. But that simply doesn't make any sense at
all - assigning OT should result in the cost either staying the same or
going up, but NOT going down. Carry it to the extreme - low on budget?
Assign ALL the project work in overtime and get it done for free! Not very
likely! So I suggest OT rate for exempt employees be equal to the standard
rate while for non-exempt employees it should be either the statutory
amount, typically time-and-a-half, or whatever a governing collective
bargaining agreement calls for. Now the cost of doing the task in question
gets computed as 32h * $10/h + 8h * $10/h or $400, just as before which is
an accurate estimate of what that task is really costing your firm.

Remember, Project DOES NOT calculate payroll cost and IMHO shouldn't be used
as such, it estimates economic costs of doing the project, ie, the
effectiveness with which the firm's assets are being utilized, which is a
totally different thing altogether. An available hour of the employee's
time is an economic asset of the firm. It's either worth the same amount
regardless of the time of day in which it is done or it's worth more outside
of the work schedule than it is inside the work schedule. But it's never
free.

 

[Confused]

JulieS:

Thanks for responding. It took me awhile to get back into this. I get how
this works and I appreciate your help. Can I add one question? Do you ever
change the max units field on the resource sheet? I took a class and the
instructor warned us to let project calculate that field and use a resource
calendar to reflect a part time employee (rather than addding 50% into that
field). Do you agree with that comment, and if so why? Thanks so much for
your help. I hope I can figure this application out!--
Thanks.
Confused

Hello Confused,

Project will only calculate overtime costs in situations where you have
put an overtime rate in for the resource(s) assigned to overtime work.
If you wish the overtime work to be "free" you may leave the overtime
rate field blank (set to $0.00 by default). However, leaving overtime
rate set to zero and assigning significant amounts of overtime is going
to skew the relationship between total work and total cost. I usually
suggest setting the overtime rate equal to the straight time rate for
salaried employees. Yes, you don't pay them more for working 50 hours
per week, but many companies do accrue costs for "extra" hours through
compensatory time.

As far as Project not shifting the schedule -- I'm afraid that is what
overtime does -- it drops the duration of tasks because the overtime
work assigned during nonworking time as defined in the calendar.

I'm not sure I understand what you are trying to accomplish by assigning
overtime but not having the schedule change. Perhaps a few more details
would help us help you.

I hope this helps. Let us know how you get along.

Julie
Project MVP

Visit http://project.mvps.org/ for the FAQs and additional information
about Microsoft Project

 

[JulieS]

Hi Confused,

Sorry for the delay in responding. I'm glad to know things are a bit
clearer about the overtime work/cost questions and thanks for the
feedback.

To your new question about Max. Units. I'm sure you'll get other
opinions on this one but as you asked, here's my thoughts and comments.

You note the instructor told you not to fill in max. units. I assume
the instructor meant to leave the unit to the default of 100% and not to
drop the max. units fields below 100% to reflect that a resource cannot
devote "full time" to a project.

If a resource truly only works part time (they work 4 hours per day on
Monday through Friday) I would most definitely change that resource's
calendar with the specific 4 hours per day they work and *possibly*
leave the max. units at 100%. By changing the resource's calendar, I am
restricting the times the resource can work on tasks. If a task is
scheduled to start at 3:00 pm and Bob is the sole resource assigned but
he only works from 8:00 am to 12:00 pm, the task start will change to
8:00 am the next day reflecting Bob's working calendar.

On the other hand, I *do* use max. units of less than 100% quite
frequently to reflect that a resource cannot gernerate one hour of
effort on project tasks for each one hour of working time in the
resource's calendar. The max. units field is the default assignment
value used by Project when resources are assigned. By setting the max.
at less than 100% and entering the work estimate a resource has given
me, Project will divide the work estimate by the max units and calculate
a duration for the task. So, for example, if the resource Sue works 40
per week, but my project sponsor says I can only have half of Sue's time
(approximately 20 hours per week). I would set Sue's max. units at 50%.
Then in reviewing a work package with Sue, she tells me task G is 20
hours of work. If I assign Sue to a 20 hour work task, Project will
calculate a task duration of 1 week (40 hours).

As I said, you will most likely get other opinions as well

I hope this helps. Let us know how you get along.

Julie
Project MVP

Visit http://project.mvps.org/ for the FAQs and additional information
about Microsoft Project

JulieS:

Thanks for responding. It took me awhile to get back into this. I
get how
this works and I appreciate your help. Can I add one question? Do
you ever
change the max units field on the resource sheet? I took a class and
the
instructor warned us to let project calculate that field and use a
resource
calendar to reflect a part time employee (rather than addding 50% into
that
field). Do you agree with that comment, and if so why? Thanks so
much for
your help. I hope I can figure this application out!--
Thanks.
Confused

 

[Confused]

You are so patient and willing to help. I hope you get paid for this!

Does changing the max units for a resource in a pool cause any problems?

 

[JulieS]

Hi Confused,

Thanks so much for the kind words -- I'm glad to help. There isn't any
pay involved with any of the volunteers who answer questions here , but
I can say without fear of contradiction, when folks like you post such
nice comments -- that's the only "pay" we ever need

To your question, changing max. units in a file (resource pool or
otherwise) *may* cause problems if you *drop* the max. units. Changing
the max. units for a resource *after* assigning the resource does not
change assignment units to tasks. So, if you drop the max. units below
100% but have resource assigned at 100%, you will create overallocations
because a resource is assigned at above his/her max. units.

If you want to change max. units and have the resource assigned at the
new max units, use the Assign resources dialog box to remove the
resource and replace with the same resource using the lower assignment
unit. Select all tasks in the project and click the Assign Resources
button. Select the resource you want to re-assign in the list. Click
the replace button and in the replace dialog box, select the same
resource -- enter in the lower assignment units.

Do be prepared however that droppping resource assignment units will
usually extend the duration of your tasks. You will see dates shift

I hope this helps. Let us know how you get along.

Julie
Project MVP

Visit http://project.mvps.org/ for the FAQs and additional information
about Microsoft Project