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 $= \frac{1461;\text{days}}{4;\text{year}}$ and $\frac{5;\text{weekdays}}{7;\text{days}}$.
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
$$ \frac{58,440}{28} = \frac{14610}{7} = 2087 \frac{1}{7} = 2087.\overline{142857} ; \text{work hours per year} $$
and (unsurprisingly)
$$ \frac{14610;\text{work hours}}{7;\text{years}} \cdot \frac{28;\text{years}}{1461;\text{weeks}} = 40 ;\text{work hours per week} $$
| 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.