Hourly Rate Management & Pricing Configuration

Configure and manage hourly rates for accurate billing, profitability tracking, and customer invoicing. Understand rate hierarchies, update strategies, and pricing workflows.

Tip

Optimizing your pricing strategy? Learn how to maximize project revenue through effective rate management. Explore our Project Invoicing features.

Overview

Hourly rates in time cockpit serve two critical purposes:

1. Customer Billing (Billable Rates)

  • What you charge customers for work performed
  • Appears on invoices
  • Determines project revenue

2. Internal Costing (Cost Rates)

  • What each hour costs your business (employee salary, overhead)
  • Used for profitability analysis
  • Does not appear on customer invoices

Key principle:

Profit = Billable Rate - Cost Rate
Margin % = (Profit / Billable Rate) × 100

Rate Hierarchy & Priority

Time cockpit uses a cascading rate system with clear priority order:

Rate Priority (Highest to Lowest)

1. Task-Specific Rate (Highest Priority)

  • Set on individual tasks
  • Most granular control
  • Overrides all other rates

2. Project Default Rate

  • Set on projects
  • Applies to all tasks/entries for that project (unless task rate specified)
  • Most common approach

3. Employee/User Rate

  • Set on employee record
  • Typically used for internal cost rate (not billable rate)
  • Fallback when no project/task rate exists

4. Company Default Rate (Lowest Priority, Fallback)

  • Global default rate (configured in settings)
  • Used when no other rates are set
  • Safety net to prevent zero-rate entries

How Rate Selection Works

When creating a timesheet entry, time cockpit determines the rate by checking in order:

Entry for Task A on Project B by Employee C:

1. Does Task A have an hourly rate? → Use it ✓
2. If not, does Project B have a default rate? → Use it
3. If not, does Employee C have a default rate? → Use it
4. If not, use company default rate → Last resort

Example:

  • Employee: John (default rate: $125/hour internal cost)
  • Project: Client Website (default rate: $150/hour)
  • Task: "Senior Development" (specific rate: $200/hour)
  • Task: "Junior Development" (no specific rate)

Result:

  • John's time on "Senior Development" → Billed at $200/hour (task rate)
  • John's time on "Junior Development" → Billed at $150/hour (project rate)

Setting Hourly Rates

Project-Level Rates

Best for: Standard rates across entire project

Configuration:

  1. Navigate to Management → Projects
  2. Open the project
  3. Set Default Hourly Rate: (e.g., $150)
  4. Click Save

Effect:

  • All timesheet entries for this project use $150 (unless task rate overrides)
  • Simple, consistent pricing
  • Easy to manage

Use cases:

  • Fixed rate for customer (regardless of who works)
  • Blended rate across team
  • Simple time-and-materials billing

Task-Level Rates (Granular Control)

Best for: Different rates for different work types

Configuration:

  1. Navigate to Management → Tasks
  2. Open the task
  3. Set Hourly Rate: (e.g., $200)
  4. Click Save

Use cases:

  • Role-based pricing:

    • Senior Developer Work: $200/hour
    • Mid-Level Developer Work: $150/hour
    • Junior Developer Work: $100/hour
    • QA/Testing: $80/hour
    • Project Management: $150/hour

  • Service-based pricing:

    • Consulting/Advisory: $250/hour
    • Implementation: $150/hour
    • Support: $100/hour
    • Training: $120/hour

  • Complexity-based pricing:

    • Architecture & Design: $200/hour
    • Standard Development: $150/hour
    • Bug Fixes: $100/hour

Employee/User Rates (Internal Cost)

Best for: Profitability tracking and cost analysis

Configuration:

  1. Navigate to User → User Details
  2. Open employee record
  3. Set Default Hourly Rate: (e.g., $75/hour internal cost)
  4. Click Save

Important:

  • This is typically the internal cost rate (not billable rate)
  • Represents employee salary + benefits + overhead per hour
  • Used for calculating project profitability
  • Does NOT appear on customer invoices

Calculation of internal cost rate:

Annual Salary + Benefits + Overhead / Billable Hours per Year

Example:
$120,000 salary + $30,000 benefits/overhead = $150,000
$150,000 / 2,000 billable hours/year = $75/hour internal cost

See: Budget Tracking for profitability analysis

Updating Rates Mid-Project

Scenario: Rate Increase During Project

Challenge: Project rate needs to increase from $150 to $175/hour

Steps:

  1. Navigate to Management → Projects
  2. Open the project
  3. Change Default Hourly Rate: from $150 to $175
  4. Click Save

Impact:

  • ✅ Future timesheet entries: Use new rate ($175)
  • ℹ️ Past unbilled entries: Still show original rate ($150)
  • 🔒 Invoiced entries: Locked at invoiced rate (cannot change)

Retroactively Adjusting Unbilled Entries

If you need past entries to use the new rate:

Steps:

  1. Navigate to Timesheet → Time Sheets
  2. Apply filters:
    • Project: Select your project
    • Date Range Set to affected period
    • Billed: = False (only unbilled entries)
  3. Multi-select entries (Ctrl+Click or Select All)
  4. Bulk update (if supported) or edit individually:
    • Set Hourly Rate Actual: $175
  5. Click Save

Warning: Cannot change rates on already-invoiced entries (they're locked for audit trail)

Handling Rate Change Communication

Customer notification workflow:

  1. Contract amendment: Update SOW with new rate
  2. Advance notice: Notify customer 30-60 days before effective date
  3. Documentation: Set effective date in project notes
  4. Update in system: Change project rate on effective date
  5. Invoice clarity: First invoice with new rate should note the change

Internal tracking:

  • Document rate change date in project description
  • Use project custom fields for rate history (if configured)
  • Generate report of pre/post rate change hours

Customer-Specific Pricing Strategies

Approach 1: Project-Level Rates (Simple)

One project = one rate

Setup:

  • Customer A, Project 1: Set rate $150
  • Customer A, Project 2: Set rate $150
  • Customer B, Project 1: Set rate $200
  • Customer B, Project 2: Set rate $200

Pros:

  • ✅ Simple to manage
  • ✅ No customization needed
  • ✅ Clear per-project pricing

Cons:

  • ❌ Repetitive if many projects per customer
  • ❌ Must update each project separately for rate changes

Approach 2: Customer Rate Tables (Advanced)

Requires: Custom entity and scripting

Concept: Create custom "Rate Card" entity:

  • Customer (relation)
  • Service Type (Development, Consulting, Support, etc.)
  • Hourly Rate

Lookup logic: When creating timesheet entry, script looks up rate from rate card based on:

  • Current customer
  • Current task/service type
  • Effective date (for historical rates)

Pros:

  • ✅ Centralized rate management
  • ✅ Historical rate tracking
  • ✅ Complex pricing models supported

Cons:

  • ❌ Requires development (scripting)
  • ❌ More complex to maintain
  • ❌ Needs customization expertise

See: Data Model Customization, Scripting Actions

Pricing Models

Blended Rate Model

Concept: One rate for all team members on project

Setup:

  • Project: "Client Website Design"
  • Rate: $150/hour (blended rate)
  • All team members bill at $150 regardless of seniority

When to use:

  • Customer prefers simple, predictable pricing
  • Team composition may fluctuate
  • Junior and senior staff balance out
  • Reduces rate negotiation complexity

Example:

Team:
- Senior Developer (internal cost: $100/hour)
- Mid Developer (internal cost: $75/hour)
- Junior Developer (internal cost: $50/hour)

Blended billable rate: $150/hour (all three)

Customer pays same rate regardless of who works
Internal profit margin varies (50%, 100%, 200%)

Role-Based Rate Model

Concept: Different rates based on employee seniority/role

Setup: Create tasks by role:

  • Task: "Senior Development" → Rate: $200/hour
  • Task: "Mid-Level Development" → Rate: $150/hour
  • Task: "Junior Development" → Rate: $100/hour
  • Task: "QA/Testing" → Rate: $80/hour

Employees select appropriate task when tracking time.

When to use:

  • Customer wants to control costs (uses juniors for simple work)
  • Transparency about who's working
  • Industry standard (e.g., legal, consulting)
  • Complex projects with diverse skill requirements

Example:

Project: Enterprise System Integration

Tasks with rates:
- Architecture & Planning: $250/hour (senior architects)
- Backend Development: $150/hour (mid-level engineers)
- Frontend Development: $120/hour (junior/mid developers)
- Testing: $80/hour (QA team)
- Project Management: $175/hour (PM)

Customer gets itemized invoice showing hours by role
Optimizes cost (right person for right job)

Service-Based Rate Model

Concept: Different rates for different services/deliverables

Setup: Tasks organized by service type:

  • Task: "Consulting & Advisory" → Rate: $250/hour
  • Task: "Development & Implementation" → Rate: $150/hour
  • Task: "Support & Maintenance" → Rate: $100/hour
  • Task: "Training & Documentation" → Rate: $120/hour

When to use:

  • Diverse service offerings
  • Value-based pricing (strategy = higher rate)
  • Mixed contract types (retainer support + project development)

Special Pricing Scenarios

Discounted Rates

Scenario: Customer receives 10% discount

Option 1: Adjust Project Rate

  • Regular rate: $150/hour
  • Discounted rate: $135/hour ($150 × 0.90)
  • Set project rate directly to $135

Pros: Timesheet entries show discounted rate immediately Cons: Doesn't show original rate (for analysis)

Option 2: Discount at Invoice Level

  • Create invoice with regular rates ($150/hour)
  • Add manual invoice line item: "10% Discount: -$1,500"
  • Invoice total reflects discount

Pros: Maintains standard rate on timesheets, shows discount separately Cons: Manual adjustment required per invoice

Option 3: Custom Field Tracking

  • Set project rate to discounted amount ($135)
  • Add custom field "Standard Rate" = $150
  • Use for internal reporting

Multi-Currency Pricing

Challenge: Time cockpit stores amounts without currency symbols

Strategies:

Approach 1: Separate Projects per Currency

  • Customer ABC - USD Projects (rates in USD)
  • Customer ABC - EUR Projects (rates in EUR)
  • Track separately, invoice separately

Approach 2: Custom Fields

  • Add custom field "Currency" to Project entity
  • Document rate currency in project notes
  • Invoice notes state currency: "All amounts in USD"

Approach 3: Accounting System Integration

  • Export timesheets to accounting system
  • Handle currency conversion in accounting system
  • Maintain single-currency data in time cockpit

See: Data Exchange, Web API

Fixed-Price Projects (No Hourly Rate Billing)

For fixed-price projects, hourly rates still matter for internal tracking:

Setup:

  • Set project rate = 0 (or internal cost rate for profitability analysis)
  • Track time normally
  • Mark timesheet entries as billable (for tracking)
  • Create invoice manually with fixed amount (not from timesheets)

Purpose: Understand actual hours spent vs. fixed price to:

  • Calculate effective hourly rate: Fixed Price / Total Hours
  • Determine profitability: Fixed Price - (Hours × Internal Cost)
  • Improve future estimating

See: Budget Tracking, Billing Administrator FAQ

Rate Management Best Practices

1. Document Rate Assumptions

In project notes, document:

  • ✓ Current rate and effective date
  • ✓ Rate change history
  • ✓ Currency (if multi-currency)
  • ✓ Discount applied (if any)
  • ✓ Special pricing terms

Example project description:

Rate: $150/hour (effective 2026-01-01)
Previous rate: $135/hour (2025-01-01 to 2025-12-31)
Currency: USD
Discount: 10% volume discount applied

2. Regular Rate Reviews

Quarterly rate review checklist:

  • □ Compare rates to market rates (competitor analysis)
  • □ Review profitability by project/customer
  • □ Identify unprofitable rates (margin too low)
  • □ Plan rate increases for next contract renewals
  • □ Update employee cost rates (salary changes)

3. Profitability-Driven Pricing

Before setting rate, calculate:

Target Margin: 40%
Internal Cost: $75/hour
Required Billable Rate = $75 / (1 - 0.40) = $125/hour minimum

Margin targets by industry:

  • Software/IT Services: 35-50%
  • Consulting: 40-60%
  • Professional Services: 30-45%

4. Granularity vs. Simplicity

Too simple: Single company-wide rate

  • ❌ Not competitive (some services overpriced, some underpriced)
  • ❌ Low margin on complex work
  • ❌ Customers may shop around

Too complex: Different rate for every employee for every service

  • ❌ Impossible to manage
  • ❌ Confusing to customers
  • ❌ Administrative burden

Optimal: 3-5 rate tiers

  • Senior/Specialized: $200-250/hour
  • Mid-Level/Standard: $125-175/hour
  • Junior/Support: $75-100/hour

5. Transparency with Customers

Rate communication:

  • ✅ Clearly state rates in contracts/SOWs
  • ✅ Explain rate tiers (if role-based)
  • ✅ Provide rate card upfront
  • ✅ Give advance notice of rate increases
  • ✅ Document in writing (no surprises)

Hourly Rate Actual

Purpose: Billable rate used for revenue calculation

Set by:

  • Automatically populated based on rate hierarchy (task → project → user)
  • Can be manually overridden per entry (if permissions allow)

Used for:

  • Invoice line item amounts
  • Revenue calculation: Duration × Hourly Rate Actual = Revenue
  • Effective rate analysis

Hourly Rate Billed

Purpose: Locks the rate when entry is invoiced

Set by:

  • Automatically set when invoice is created
  • Copied from "Hourly Rate Actual" at time of invoicing

Used for:

  • Audit trail (prevents rate changes after invoicing)
  • Historical rate tracking
  • Ensures invoice accuracy

Important: Once Hourly Rate Billed is set (entry is invoiced), the rate cannot be changed.

Internal Cost Rate (UserDetail.DefaultHourlyRate)

Purpose: Employee cost for profitability calculation

Used for:

  • Profitability analysis: Revenue - (Duration × Cost Rate) = Profit
  • Resource allocation decisions
  • Pricing strategy (ensure rates cover costs + margin)

Not visible on: Customer invoices

Automation & Integration

Automatic Rate Assignment

Triggers/Actions can automate rate setting:

Example use case: "Ensure no zero-rate entries"

# Trigger on Timesheet Save
if timesheet.HourlyRateActual == 0:
    if timesheet.Task and timesheet.Task.HourlyRate:
        timesheet.HourlyRateActual = timesheet.Task.HourlyRate
    elif timesheet.Project and timesheet.Project.DefaultHourlyRate:
        timesheet.HourlyRateActual = timesheet.Project.DefaultHourlyRate
    else:
        timesheet.HourlyRateActual = GetCompanyDefaultRate()

See: Scripting - Triggers, Scripting - Actions

Rate Import/Export

Bulk rate updates:

  1. Export projects/tasks to Excel via Data Export
  2. Update rates in Excel
  3. Import back via Data Import

API access:

  • Update rates programmatically via Web API
  • Sync rates from external pricing system
  • Automate rate increases based on CPI or contracts

Reporting & Analysis

Rate Analysis Reports

Questions to answer:

  • What's our effective hourly rate by project? (Revenue / Hours)
  • Which projects have highest/lowest rates?
  • What's our average billable rate by customer?
  • Are we applying correct rates (vs. contracted rates)?

Built-in reports:

  • Navigate to Reporting → Built-In Reports
  • Revenue reporting shows rates implicitly (Revenue / Hours = Effective Rate)

Custom reports:

  • Create SSRS reports with rate analysis
  • Export to Excel for pivot table analysis

See: Built-In Reports, Custom Reports

Rate Compliance Auditing

Verify correct rates are being used:

  1. Export unbilled timesheet entries
  2. Check Hourly Rate Actual against contracted rates (from contracts)
  3. Identify discrepancies (too high or too low)
  4. Correct before invoicing

Common issues:

  • ❌ Employee selected wrong task (wrong rate applied)
  • ❌ Project rate not updated after contract changed
  • ❌ Manual override incorrectly applied
  • ❌ Missing rate (zero-rate entries)

Project Management

Invoicing

Reporting

Advanced

See Also

FAQs:

API & Integration:

For rate configuration support, contact support@timecockpit.com or see the Billing Administrator FAQ.