How to calculate utilization for a team that bills its time
In short
Utilization is billable hours divided by available hours, multiplied by 100, with a realistic target of 70% to 80%. Define available hours after leave and holidays, then record time against jobs as the work happens.
- Utilization equals billable hours divided by available hours, multiplied by 100.
- Available hours exclude leave, public holidays and sickness, but not admin or training.
- Hours logged against jobs as the work happens are far more reliable than Friday timesheets.
- A realistic target is 70% to 80%, set by role and checked against your own cost and margin model.
- Total hours for the team figure instead of averaging individual percentages.
Utilization is billable hours divided by available hours, but the figure only means something once you define available time properly and record hours against jobs as the work happens. This guide walks through the formula, a worked example and a realistic target.
Utilization is billable hours divided by available hours, multiplied by 100. The numerator is time you can charge a customer for, or time that is recovered through a fixed price. The denominator is the time a person could realistically work after holidays, leave and sickness. For most teams that bill their time, a sensible target sits between 70% and 80%, with about 75% the usual reference point. The formula takes seconds. The hard part is agreeing what counts as available, and getting honest hours into the calculation instead of a timesheet reconstructed from memory on Friday afternoon.
What the utilization formula measures
The formula is utilization = billable hours ÷ available hours × 100. If someone bills 30 hours in a 40-hour week, utilization is 75%. Two commonly cited sources, Asana and Kantata, give the same formula, and professional services benchmarks cluster around the same target range.
The formula is simple because it answers one question: of the time this person could have spent working, how much earned money? It does not tell you whether the work was priced well, finished on budget or done to a good standard. Pair it with job margin before you draw conclusions.
Billable utilization is also not the same as resource utilization. Resource utilization counts all productive time, including training, internal projects and sales support. Billable utilization counts only hours that generate revenue. Both are useful, but they answer different questions, so pick one and label it clearly in every report.
Decide what counts as available hours
The denominator is where most utilization figures go wrong. Kantata makes the point directly: available hours should reflect actual working capacity after time off, public holidays and planned leave, not a theoretical 40 hours multiplied by 52 weeks. Using gross hours inflates the denominator and makes a healthy team look underused.
Here is a worked example. An employee has a contracted 8-hour day, 260 working days a year, so 2,080 gross hours. Subtract 25 days of annual leave (200 hours), 8 public holidays (64 hours) and an average of 6 sick days (48 hours). Available hours are 1,768. If that person bills 1,240 hours, utilization is 70.1%. Measured against the gross 2,080 hours, the same person looks like 59.6%, and a manager might wrongly conclude they are underperforming.
Write the rule down. Decide whether training days, internal meetings and quoting time stay in the denominator. The usual choice is yes, because those hours are real capacity that the business pays for. Whatever you choose, apply it to everyone and keep it fixed from one period to the next. A number that changes definition every quarter cannot show a trend.
Do not net out non-billable work
If you remove admin and quoting time from available hours, utilization drifts toward 100% and stops telling you anything. Only leave, holidays and absence come out of the denominator.
Decide what counts as billable hours
The numerator needs the same discipline. Billable hours are hours that a customer pays for, either on a time and materials basis or as part of a fixed-price job. Time spent on unpaid rework, quote preparation that did not win, and goodwill fixes is not billable, even if someone logged it against a customer name.
Fixed-price work needs a rule of its own. Kantata notes that on fixed-fee engagements, hours above the planned level erode margin, whereas on time and materials work every extra billable hour flows through to revenue. So count fixed-price hours as billable when they are logged against a priced job, then compare them to the hours you allowed in the quote. High utilization on a job that overran its budget is not a good result.
How to calculate utilization step by step
Set the period and the people
Choose a period, usually a month, and list who is in scope. Include everyone whose time you sell. Leave out roles that never bill, such as finance or reception, or report them separately so they do not dilute the team figure.
Work out available hours per person
Start with contracted hours for the period. Subtract annual leave, public holidays, sickness and any other planned absence. Part-time staff and new starters need their own contracted hours, not the team default.
Define billable time in writing
Agree which activities count as billable, which count as non-billable, and where fixed-price job hours sit. Put the rule in one page that every team lead can read.
Collect hours against jobs as the work happens
Have people record time against the specific job at the end of each task or day, not at the end of the week. Every hour should carry a job reference or a named non-billable category such as admin, training or quoting.
Total billable hours per person
Add up the hours logged to billable jobs in the period. Check for unallocated time. If someone has 10 hours with no job or category, chase it before you calculate, because the gap is usually billable work that was never recorded.
Divide and multiply by 100
Divide billable hours by available hours for each person, then multiply by 100. Calculate the team figure from total hours, not by averaging individual percentages, so that a part-timer does not carry the same weight as a full-time colleague.
Compare with a target and look at the spread
Set targets by role. Kantata's guidance is that delivery staff carry higher targets, while managers and owners need more non-billable capacity for sales and oversight. Review the range between people as well as the team average.
Review monthly and act on one cause at a time
Look at the trend, not a single month. If a figure is low, find out whether the cause is missing work, slow handovers between jobs, unrecorded time or too much admin. Fix one cause, then measure again.
Why jobs beat Friday timesheets
A timesheet filled in on Friday records what a person remembers, not what happened. Small jobs, phone calls and short site visits disappear. Hours get rounded toward a tidy 8 a day. The result is a utilization figure that looks plausible and cannot be trusted, which is worse than having no figure because it drives decisions about hiring and pricing.
Tracking against jobs fixes the problem at the source. When time is recorded against the job that caused it, the hours link to the quote, the customer and the margin. You can see that 40 hours went into a job priced for 25, and you can ask whether the cause was scope, estimating or rework. That is information a bare timesheet total never gives you.
This is where a system that treats the job as the record helps. In Zigaflow jobs, the job carries the work, the costs and the customer in one place, so effort attaches to something you can price and review. For jobs that run over several stages, project tracking shows milestones and progress, which helps you judge whether the hours logged match the work completed. The hours and margins can then be reviewed together through reporting. You can run the same method in a spreadsheet, but the discipline of one job reference per hour is what makes either version accurate.
What is a realistic utilization target
Benchmarks give a starting range, not a goal. The 2025 SPI professional services benchmark, as summarized by Kantata and Mosaic, treats about 75% as the reference point, with 70% to 80% as the range that balances margin against burnout. Mosaic reports that worldwide employee billable utilization in professional services averaged just over 68.9% in 2023. These are professional services figures, mostly from consulting and IT firms, so a trades or installation business should treat them as a calibration point only.
Do not aim for 100%. Kantata lists what disappears at full utilization: proposal work, mentoring, handovers between jobs, internal admin and any buffer for scope changes. Sustained levels above 80% also tend to coincide with rising attrition risk.
The better target comes from your own numbers. Take your costs per person, your charge-out rate and the margin you need, then calculate the utilization at which the business breaks even and earns that margin. If the answer is 68%, a target of 75% is a stretch and a target of 85% is fantasy.
Report by role
A single team figure can hide an owner at 30% and a junior at 90%. Show utilization by person or role every month, next to the target for that role.
Common mistakes when calculating utilization
Four errors account for most bad figures. The first is using gross hours in the denominator. The second is averaging percentages instead of totalling hours. The third is mixing billable and resource utilization in one report. The fourth is trusting hours that were logged days later.
Fix these four and the formula does its job. You get a number you can compare month to month, a clear view of where time goes, and a target based on your costs rather than someone else's benchmark.
Sources
- Utilization rate: Formula, benchmarks & how to improveAsana · accessed 2026-10-23
- Professional Services Utilization Benchmarks and Capacity Planning Best PracticesKantata · accessed 2026-10-23
- Billable Utilization Rate Statistics in Professional Services FirmsMosaic · accessed 2026-10-23