202211121253 Value of employee time

A simple table to relate an employee’s time cost to proposed time savings.

All values are per $100,000 in total compensation cost to the business and use average values for time, which is calculated as follows.

Given $365.25$ days per year $= \frac{1461 days}{4 year}$ and $\frac{5 weekdays}{7 days}$ .

We have $\frac{7305}{28}$ weekdays per year and $\frac{1461}{28}$ weeks per year.

Using this and the rate of 8 work hours per weekday our total work hours per years and weeks are

\frac{58, 440}{28} = 2087 \frac{1}{7}

work hours per year and (unsurprisingly)

\frac{14610 work hours}{7 years} \cdot \frac{28 years}{1461 weeks} = 40

work hours per week.

Percent	Weekly	Total	Total (Exact)	Weekly Cost	Total Cost
100.000%	40 hrs	2087 hrs	$2087 \frac{1}{7}$	$1916.50	$100,000.00
50.000%	20 hrs	1044 hrs	$1043 \frac{4}{7}$	$958.25	$50,000.00
25.000%	10 hrs	522 hrs	$521 \frac{11}{14}$	$479.12	$25,000.00
10.000%	4 hrs	209 hrs	$208 \frac{5}{7}$	$191.65	$10,000.00
5.000%	2 hrs	104 hrs	$104 \frac{5}{14}$	$95.82	$5,000.00
2.500%	1 hrs	52 hrs	$52 \frac{5}{28}$	$47.91	$2,500.00
1.250%	30 min	26 hrs	$26 \frac{5}{56}$	$11.98	$1,250.00
1.000%	24 min	21 hrs	$20 \frac{61}{70}$	$19.16	$1,000.00
0.625%	15 min	13 hrs	$13 \frac{5}{112}$	$11.98	$625.00
0.20833%	5 min	4 hrs	$4 \frac{39}{112}$	$3.99	$312.50
0.04167%	1 min	52 min	$\frac{487}{560}$	$0.80	$41.67

Takeaways

If it takes an employee whose total compensation $100,000 per year 1 minute per week to do something, it costs the business $42 dollars per year.

These costs are for perfectly efficient employees, meaning that the true cost of focused work hours is much higher given the amount of "inefficiency" that humans have per day. E.g. our ideal TC employee going to the bathroom for only 5 minutes per day costs the company about $1000 per year. Viewed slightly differently, these bathroom hours per year would change the work hours per year value, which would change the rate of total comp to work hours making each focused hour more costly/valuable.

Given all of this, it's surprising that companies aren't more interested in finding employee tool efficiencies. If we save 15 minutes per week for 10 ideal TC employees, we could license a tool for $6,250 dollars per year and come out "even". In reality, I doubt many companies would take this hyper-rational stance though and wouldn't buy something with that cost for that little time savings.

These numbers are runaway different when talking about saving employees significant time per week. A company could spend $1M per year on a tool that saves 10 ideal TC employees 4 hours per week or 48 minutes per day. Viewed another way, do 10 employees spend 1 afternoon per week on something that we could automate? We can afford to throw $1M at that project until it doesn't save us money.

Related idea of build vs buy calculator.