What one manual process actually costs to run
The method for putting a number on a repetitive job, and the four things that make most estimates too low.
Short answer. Annual cost = volume per month × minutes per item × loaded hourly cost × 12. The figure most people produce is too low, because they price the happy path at salary rate and ignore chasing, correcting and re-checking.
The formula
Three numbers give you a defensible figure: how often the job happens, how long one instance takes end to end, and what the person doing it costs per hour.
Annual cost = (items per month) × (minutes per item ÷ 60) × (loaded hourly cost) × 12.
A team processing 400 items a month, at 12 minutes each, with a person costing £22 an hour loaded, is spending 960 hours and roughly £21,000 a year on that one job.
Use the loaded cost, not the salary
The most common error is dividing an annual salary by 1,950 hours and calling that the hourly cost. It is not what the person costs the business.
The loaded cost includes employer National Insurance, pension contributions, holiday and sick cover, equipment, software licences, management time and premises. Depending on the role and the business, loaded cost is commonly a quarter to a half again on top of salary. Use your own accounts rather than a rule of thumb, but do not use the bare salary.
Count the touches, not the task
Ask how long the job takes and you will be told how long the clean version takes. That is rarely what happens.
- Chasing the information that did not arrive with the request
- Re-checking work because the first pass was ambiguous
- Correcting what was keyed into the wrong field
- Handing the item to someone else and explaining it
- Picking the job back up after an interruption
These are part of the cost. A job quoted at six minutes often measures at eleven once the touches are counted, and it is the touches that automation removes most reliably.
Price the exceptions separately
Most repetitive work has a long tail: the 10 to 20 per cent of items that do not follow the standard path. They frequently cost more than everything else combined, because they interrupt someone senior.
Measure the standard path and the exception path separately. It changes what is worth automating, and it sometimes shows that the exceptions are the whole problem.
Be conservative on purpose
A costing exercise will happily produce an enormous number if you let it. Assume lower volumes and fewer minutes than your first estimate. A figure you would defend to an accountant is the only one worth acting on.
If you want to work through it against your own numbers, the cost calculator does the arithmetic.
Related questions.
The full cost of employing someone for an hour, not their salary divided by hours worked. It includes employer National Insurance, pension, holiday and sick cover, equipment, software, management time and premises.
Accurate enough to defend to a sceptical accountant. Deliberately conservative estimates are more useful than precise ones, because the figure is only worth acting on if you would stand behind it.
Because the measurement decides whether a build is worth doing at all. Some processes turn out to be cheap to run by hand, and the honest conclusion is to leave them alone.
Describe the process you want to automate.
You will receive a fixed price and a build plan.
There is no charge for the initial call and no obligation. You deal directly with the engineer who builds the system.