Labor Burden

Epicor ERP 10
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1

Hi All,

I am working on labor costing and am running into an issue with how labor burden is being calculated. We are working with resources that are representative of crews, therefore we are adjusting our labor rate and burden rate to reflect the number of people represented in that crew. i.e. Crew of 2 = $15/person x 2 = Labor Rate , same logic applies to burden. We do our best to estimate the resource as close as possible to the actual reporting that will occur out on the shop floor. For example if we are most efficient using that crew of two that is what we use to estimate on our methods.

As you know the actual labor rate is determined based on the employee labor rate. No issues there since the actual employee is set up the same way our resources are, therefore our cost is still calculated accurately regardless of if there is a change between the estimated crew and actual crew.

I am finding however that the actual burden rate is still driven by the burden rate on the resource. This is causing us to over calculate the burden rate when the actual employee crew reporting to a job differs from the estimate. For example, we estimated the job to be completed using a crew size of 2 and the burden rate is based on two people doing the work. If we are logging the actual hours using a crew of 4 because we need to complete something sooner, the burden rate is still reflecting only two people.

Estimate = Crew of 2 @ 1 hour. Burden Rate of 30 (2 people x 15 per person) = total burden of 30
Current Actual = Crew of 4 @ 1 hour. Burden rate of 30 (2 people x 1 hour x 15 per person) = total burden of 30
True Actual = Crew of 4 @ 1 hour. Burden Rate of 60 (4 people x 1 hour x 15 per person) = total burden of 60

Does anyone know of a way to control the actual burden rate at the employee level rather than being dependent on the resource?

2

To do that, you would need to add your employees as resources and apply the burden on them instead of on the physical resources.

3

Is your burden a consistent percentage/multiplier of labor cost? You could change your resource burden rates to be X% of labor which would then use the estimated labor cost and crew size for planning and the actual employee’s labor rate for actual burden.

4

Currently we are calculating burden as a flat rate per hour.

5

I have worked with assembly areas that change in size like you have. In one case we were back flushing labor, so all the labor when against a generic “dept” employee and the real employees were just clocked into the department as indirect for the day.

In another case we used a “per person” PPH rate on the method and burden rate was a percentage. Then when 2 people clocked on to the job twice the rate was expected, if three people clocked on then three times the rate was expected, etc. We tweaked the our reporting to give us a Job efficiency summary for the people clocked into that job.

Getting to a burden percentage number is the key on that side.

6

Thanks @bboes & @tsmith we are going to do some testing on the percentage just to ease finances concerns, but I think this is the best path forward. Appreciate your help and insights!