# Understanding Labor Rates

This article explains how labor rates and posting labor costs works in ResourceFirst.

### Overview

Labor cost calculation is very simple once a rate has been determined. If you have a monthly rate, let’s say \$10,000/month: The calculation simply takes the monthly rate and multiplies by the monthly FTE demand.  If the forecast demand is .75 / month on a project, the labor cost would be \$7,500 per month.

ResourceFirst looks at each labor assignment and determines if there is an applicable rate. If there is no explicit rate on the assignment row or on any other assignment attribute such as node or skill, the rate table is tested for a rate. The rate table method is described in the next section below.

ResourceFirst provides many places and methods to define the rate to be applied to any given labor assignment, even to specific time periods.

Note that this applies to labor costs only. Non-Labor costs are entered directly on the Financial Assignments pages. See Financial Assignments for more.

IMPORTANT: For all rates entered in ResourceFirst, a zero dollar amount ("\$0") is considered a rate value. Be careful to leave the rate field NULL (blank) if you do not want a zero rate to override any other rates for the item.

Note that by default, rates are defined as monthly rates. If hourly rates are desired, contact your PDWare administrator (an "R" appended to your license key will switch the rates to hourly).

### Variable Rate Table

The rate matrix defines labor assignment attributes that call for a specific rate over a specific period of time. See the article Administering Rates for how to create and edit rate table items. When evaluating an assignment for a rate table value, the algorithm takes all relevant values from the assignment and does a best fit match on all relevant rate table rows. The best fit row provides the rate to be used in the appropriate time periods.

For example, if there are two assignments with

node = "Life Sciences\Engineering\Electrical", Country = "", period date 3/2021

node = "Life Sciences\Engineering\Electrical", Country = "USA", period date 3/2021

the first assignment gets rate \$12,000 from row 1 and the second gets \$13,000 from row 2.

### Defining Cost and Bill Rates by Cost Category

If you simply want to define cost and bill rates at the Cost Category level (e.g., Contractor, Employee), you would go to Administration->Lists->Cost Categories. Below is an example of cost categories and their associated cost and billing rates.

### Order of Operation: How a Rate to Apply is Determined

Explicitly defined rates take precedence over the rate table if a value is present for the item.

Rates can be defined for:

• Individual assignment rows
• Individual resource rows
• (Resource) cost category records
• Skill records

The hierarchy of use is as follows if a value is present:

• Assignment rate
• Resource rate (for resource assignments)
• Skill rate (for skill assignments and for resource assignments if no previous value found)
• Cost Category rate
• Rate Matrix rate

### Automatic Creation of Labor Cost Rows on the Financial Assignments Page

Whenever a Financial Assignments page is first activated, labor cost rows are created according to the summarization method configured in Administration. Thereafter during a session those rows are recalculated only when there has been a change to labor demand on a labor assignments page.

For more on posting labor costs, see Project Financials.