Labor rate and effective labor rate
The posted rate is the price on the wall. The effective rate is what the jobs actually brought in for each hour billed.
Bay 01
Three numbers, three questions
- Posted labor rate: what you charge for an hour of labor. It is the rate on the line.
- Effective labor rate: labor sold divided by the hours billed on the same jobs. It is what an hour actually brought in.
- Shop rate: what an hour of labor costs you to provide. That is the first guide in this set, How to work out your labor rate.
Bay 02
Why the effective rate runs below the posted one
- It drops wherever labor is:
- discounted;
- quoted flat under book time;
- given away on a comeback.
- It can run above the posted rate where a job billed more hours than it took to price.
Bay 03
What to do with it
- Read it by technician and by whoever wrote the job up. A gap that sits with one person points at how that person prices or discounts, not at the rate on the wall.
Bay 04
Where Scarab OS does this
- Reports › All reports › Effective labor rate shows labor sales over labor hours billed, by technician and by service advisor, beside the rate you post.
- Reports › All reports › Shop rate shows what an hour costs you beside what you charge.
Bay 05
Questions shops ask
What is an effective labor rate?
Labor sold divided by the hours billed on the same jobs: what an hour actually brought in, after discounts and flat quotes.
Why is my effective labor rate lower than my posted rate?
Labor that was discounted, quoted flat under book time, or given away on a comeback brings in less than the posted rate for the same hours.
What's the difference between labor rate and shop rate?
The labor rate is what you charge for an hour. The shop rate is what an hour costs you to provide.
