Agency utilisation rate: how to calculate it, and how to set a target you can defend

The short answer

Utilisation (utilization in US spelling) is the share of someone's time that goes on billable client work. The usual formula is:

Utilisation = billable hours ÷ available hours × 100

A designer who bills 1,200 hours in a year in which they were available for 1,717.6 hours has a utilisation of 69.9%. Count the same 1,200 hours against the 1,976 hours in their contract and the answer is 60.7%. Same person, same work, two answers. That gap is why there is no single "good" utilisation rate you can copy from someone else.

The useful target is the one that covers your costs and leaves the margin you want, at the rates you actually collect. This guide shows how to work that out, with examples for Australia, the UK and the US, and explains why the benchmarks you will find quoted online deserve care.

Three things people call utilisation

Most arguments about utilisation are really arguments about the denominator. Before you compare numbers, find out which of these each person means.

1. Capacity-based: billable hours ÷ available hours

Available hours are contracted hours minus annual leave, public holidays and other expected absence. This is the version we recommend for targets, because it measures what someone could reasonably bill. A person on leave for three weeks is not "under-utilised" for those weeks.

Some teams divide by contracted hours instead and leave absence in. That is simpler, but it builds leave into the target, so a person who takes all their leave can never hit it. If you use contracted hours, set the target lower to match, and say so.

2. Worked-hours-based: billable hours ÷ hours logged

This divides by the hours someone actually logged, including overtime. It measures how a person's working time was split, not how much they billed. It also hides how long people work: a designer who bills 70% of a 50-hour week and one who bills 70% of a 38-hour week score the same. Use it to see where time goes, not to set targets.

3. Billed utilisation, and how it differs from realisation

Some agencies count only the hours that were invoiced, after write-offs. That mixes two different questions. Utilisation asks "did we spend the time on client work?" Realisation asks "did we get paid for it at our rate?" Keep them separate:

• Utilisation = billable hours ÷ available hours
• Realisation = revenue actually collected for that work ÷ (billable hours × standard rate)

A fixed-fee job quoted at 100 hours that takes 150 hours still counts as 150 billable hours, so utilisation looks healthy. Realisation on that job is 100 ÷ 150 = 66.7%. You need both numbers to see the problem.

Worked example: one designer in Sydney, London and New York

Here is the same full-time designer employed in each city in 2027, billing 1,200 hours. The hour bases come from each country's rules or from typical company policy, as noted.

• Australia: under the National Employment Standards, an employer must not ask a full-time employee to work more than 38 hours a week unless the additional hours are reasonable; an award or agreement can set different hours [1]. Full-time employees get 4 weeks of annual leave [2] and 10 days of paid sick and carer's leave a year [3]. In 2027, nine statewide NSW public holidays fall on weekdays [4].
• UK: there is no standard legal working week. The law sets a 48-hour average maximum, normally over 17 weeks, which workers can opt out of [5]. We use a 37.5-hour contract as an example. Statutory holiday is 5.6 weeks, which is 28 days for a 5-day week, and employers can count bank holidays towards it [6]. All eight 2027 bank holidays in England fall on weekdays [7].
• US: federal overtime applies to non-exempt employees after 40 hours in a workweek [8], so 40 hours is the usual full-time base. Federal law does not require paid vacation, sick leave or holidays; they are a matter of agreement between employer and employee [9]. We assume a company policy of 15 days' paid time off and 10 paid holidays. State and city sick-leave laws may add to this.

Sickness is an assumption: we allow 5 days a year in every country. Replace it with your own team's average.

Three things stand out:

• The choice of denominator moves the answer by 7 to 9 percentage points for the same person.
• The New York designer looks least utilised, only because their contract has more hours and less statutory leave. Comparing offices on one target without adjusting for this is unfair to someone.
• The UK figure uses the statutory minimum of 28 days including bank holidays. If your contracts give 25 days plus bank holidays, available hours fall by another 37.5.

Public holidays also change from year to year and between states. Use the 2027 leave planner to see each region's dates.

Setting a target from your own economics

A target should answer one question: how many billable hours does this person need to cover what they cost, plus the margin you want?

The break-even formula

Break-even utilisation = fully loaded annual cost ÷ (average realised rate × available hours)

• Fully loaded cost is salary plus employer on-costs (pension or super contributions, payroll taxes, insurance) plus a share of overheads such as rent, software and staff who do not bill.
• Average realised rate is your standard rate × your realisation. If you charge $180 an hour but collect 90% of it after discounts and write-offs, your realised rate is $162.
• Available hours come from the table above.

To include a profit margin (profit as a share of revenue), divide the cost by (1 − margin) first.

Worked example: the Sydney designer

All amounts are in one currency; the method works in any. The salary, on-cost and overhead figures are assumptions for illustration.

1. Salary $95,000, plus on-costs we assume at 18% ($17,100), plus an overhead share of $30,000. Fully loaded cost: $142,100.
2. Standard rate $180 an hour at 90% realisation. Realised rate: $162.
3. Available hours: 1,717.6. Billable value of every available hour: $162 × 1,717.6 = $278,251.
4. Break-even utilisation: $142,100 ÷ $278,251 = 51.1%, or 877 billable hours.
5. For a 25% margin, revenue must be $142,100 ÷ 0.75 = $189,467. Target utilisation: $189,467 ÷ $278,251 = 68.1%, or 1,170 billable hours. In a normal 38-hour week that is about 25.9 billable hours.

Now the target has a reason behind it. If someone asks why 68% and not 75%, you can show them the sum, and change it when the rate, the salary or the margin changes.

Targets by role, from cost and margin

The same sum for four roles shows why one target for everyone rarely works. We assume 1,700 available hours, 18% on-costs, a $30,000 overhead share each, 90% realisation and a 25% margin. Salaries and rates are illustrative.

Read it as a test of your pricing, not as a list of targets to hand out. The pattern most agencies see is that production staff (designers, developers, writers) can bill most of their available time, while account managers, leads and founders spend much of theirs on work no client pays for directly: selling, reviewing, hiring, managing. If a role's required utilisation is higher than that role can realistically bill, you have three honest options:

• raise the rate for that role, or for the team;
• accept a lower margin on that role; or
• treat part of that role's cost as overhead and recover it through everyone else's rates.

What you should not do is give an account manager a 77% target they cannot reach and then call them under-performing.

The same sum for a whole studio

Take a 10-person studio whose total yearly cost, including salaries, on-costs, rent, software and one non-billable operations role, is $1,313,000. Six production staff have 1,700 available hours each. Two account managers bill about 40% of their time and the director about 30%, which adds 1,870 billable hours. The realised rate is $162.

• Break-even needs $1,313,000 ÷ $162 = 8,105 billable hours. Take away the 1,870 from the account managers and director, and production must bill 6,235 of its 10,200 available hours: 61.1%.
• A 25% margin needs 10,807 billable hours, so production must bill 8,937 hours: 87.6%.

87.6% would leave production staff almost no time for internal work, training or reviews. This studio cannot reach a 25% margin by asking people to work harder. It needs a higher rate, better realisation, or a different mix of billable and non-billable roles. That is the kind of decision a utilisation target should lead to.

To turn a target into an hourly rate, our free agency rate calculator starts from salary, employer on-costs and overheads and shows the break-even rate.

Realisation: why 80% utilisation can still lose money

Utilisation says time went on client work. It does not say the client paid for it. Back to the Sydney designer: at 80% utilisation they bill 1,374 hours, worth $247,334 at the $180 standard rate. Their cost is $142,100.

Realisation falls for three common reasons:

• Write-offs: time logged to a client that you decide not to invoice, such as rework caused by your own mistake.
• Discounts: a lower rate agreed for a client, or a discount at invoice time.
• Fixed-fee overruns: every hour over the estimate lowers the effective rate on that job.

Track them separately, with a reason on each write-off, so you can fix the cause. Our guide to billable and non-billable time includes a set of write-off reason codes.

What published benchmarks say, and what they don't

You will see two figures repeated everywhere: that 70-80% utilisation is "ideal", and that the average agency employee bills about 25 hours a week. We looked for the original source of both and could not find one we could read.

• Harvest's utilisation calculator says "most agencies run at 55-60% utilization" and that "a realistic target for service businesses is 70-80%". The page gives no source or survey for either figure [14].
• The "25 billable hours a week, plus 13 non-billable" figure is usually credited to Promethean Research. Promethean's public page for its 2026 report does not contain it, and the full report is behind a form [13]. We have not read the full report, so we do not repeat the figure.

Here is what the traceable sources show, as at 4 October 2026.

What this means for you:

• The only large, recent, readable figure (SPI's 66.4%) covers professional services firms in general, not an agency sample (the report page does not mention agencies), and its definition of available hours may differ from yours.
• Agency-specific surveys exist but sit behind forms. If you use one, write down the population, year, sample size and definition next to the number.
• Your own numbers, set from your costs and rates as above, are a better target than any of these.

Reading utilisation weekly without burning people out

Weekly utilisation is noisy. A public holiday, a pitch week or two days of training can swing one person's number by 20 points. Some habits that help:

• Use a rolling 4-week average for each person, and a rolling 13-week average for the team. Look at the trend, not one week.
• Take leave and public holidays out of the denominator for the weeks they fall in, so a short week does not look like a bad one.
• Watch logged hours as well as the percentage. Someone who is at 75% but logging 48 hours a week for a month is a warning, not a success.
• Watch leave balances. A balance that only grows can mean someone feels they cannot take time off.
• Discuss numbers one to one, not on a leaderboard. A public ranking rewards logging time to clients that should have been internal.
• Separate the causes. Low utilisation can mean not enough sold work, poor scheduling, or too much internal work. Each has a different fix.

Common mistakes

1. Counting client work you cannot bill as billable. Warranty fixes and rework caused by your own mistakes belong to the client, but you will not invoice them. Track them as client time that is not billable, or utilisation will look better than revenue.
2. Ignoring leave. A target set on contracted hours that nobody can reach once they take their leave.
3. Comparing teams that use different denominators, or offices with different contract hours, as in the worked example.
4. One target for every role. See the role table.
5. Reporting utilisation without realisation. High utilisation on fixed-fee overruns looks like success until the invoices go out.
6. Copying a benchmark without knowing who it covers, when it was measured and what it divides by.

Calculator and spreadsheet

Our free utilisation calculator does these sums for each person, with 2027 public holidays for your region. The method above also works in any spreadsheet:

1. One row per person: contracted weekly hours, days per week, annual leave days, public holidays on their working days, expected sick days.
2. Available hours = weekly hours × 52 − (leave days + holiday days + sick days) × hours per day.
3. Add billable hours from your timesheets, the standard rate and your realisation.
4. Add each person's fully loaded cost, then break-even and target utilisation as above.

For the billable hours themselves, the timesheet calculator splits a week into billable and non-billable time and exports it to CSV.