Utilization Rate Explained
How to measure it, improve it, and avoid gaming. Plain language, real formulas, and role-based examples—so you can set targets and read trends without turning numbers into a blame game.
No credit card required
What Is Utilization? (Plain Language)
Utilization is the share of someone's available working time that is spent on billable (or otherwise "productive") work. If you have 40 hours of capacity and 32 hours are billable, utilization is 80%.
It's used for capacity planning (can we take on this client?), profitability (are we covering our cost?), and team balance (who's overloaded or underused). The catch: how you define "billable" or "productive" and how you count hours must be consistent, or the number is meaningless—or gamed.
Billable utilization = Billable hours ÷ Capacity (hours)
Capacity is usually contracted or expected hours in the period (e.g. 40 h/week). Some teams use "productive" time (billable + internal project work) in the numerator instead of billable only—just define it once and stick to it.
Formulas and Examples by Role
Same formula, different expectations. Set targets by role so you're not comparing developers to PMs unfairly.
Developer
Capacity: 40 h/week. Billable: 28 h (client dev work). Non-billable: 12 h (standups, internal tools, learning).
28 ÷ 40 = 70%
Typical target: 65–75%. Lower than 100% because of meetings, context switching, and non-client work.
Project Manager
Capacity: 40 h/week. Billable: 20 h (client-facing PM). Non-billable: 20 h (internal coordination, admin).
20 ÷ 40 = 50%
Typical target: 45–55%. PM time is often split; don't expect developer-level utilization.
Designer
Capacity: 40 h/week. Billable: 26 h (client design, reviews). Non-billable: 14 h (internal, research, handoff).
26 ÷ 40 = 65%
Typical target: 60–70%. Creative work often has more internal iteration and client rounds.
Categorize Time Consistently
Utilization only works if everyone uses the same rules. Define a simple taxonomy and stick to it.
- Billable — Client projects, direct client deliverables. Counts in utilization numerator.
- Non-billable (productive) — Internal projects, training that improves delivery. Some teams count this in a "productive utilization" metric.
- Non-billable (overhead) — Admin, company meetings, leave. Excluded from utilization so capacity isn't inflated.
Document which projects/tasks map to which category. Review and correct mislabeled time in your weekly review so trends stay meaningful.
Setting Targets and Reading Trends
Set targets by role (see examples above). Then interpret trends, not single weeks. One bad week (sick leave, holiday, project gap) will tank utilization; a 4-week or monthly rollup is more stable and fair.
- Use utilization for capacity planning: "We have 20% spare capacity this quarter" vs "We're overbooked."
- Use it for coaching: "Your trend has been below target for 3 weeks—let's look at allocation and blockers."
- Don't use a single week to judge performance; don't tie utilization alone to pay without clear guardrails.
What Not to Do: Gaming and How to Keep It Honest
When utilization is tied to pressure or rewards, people game it. Here's what to avoid and how to reduce it.
Padding hours
Logging more time than actually worked to hit a target. Fix: use timers where possible, review outliers, and don't make utilization the only success metric.
Mislabeling
Marking non-billable work as billable (or the reverse) to shift the ratio. Fix: clear taxonomy, weekly review, and spot-checks. Audit logs that show who changed what and when help deter and detect.
Signals that keep it honest
Audit logs — Immutable log of time entries and edits (who, when, reason). Makes mislabeling and backdated changes visible. Team norms — Make "accurate time = trust" part of culture; coach on consistency rather than only on hitting a number.
Time Tracking That Supports Honest Utilization
Billable vs non-billable, audit trails, and reports that show trends—so you can plan capacity and coach teams without gaming.
Start Free Trial14-day free trial. No credit card required.