A guide to third sector trading - WCVA

It’s an idea, but is it business? A guide to third sector trading
Appendix 1 Appendix 2 Appendix 3
6. Preparation: There are a few points to be aware of before
you calculate the unit cost of your service as part of a funding or
contract proposal:
• make sure you have considered the break points (see above)
and accurate estimates for start up costs
• it is critical that you know all the costs involved in providing a
service and include them in your calculations, so make sure you
have collected figures for every type of expenditure in the cost
centre
• it can be difficult to grasp the fact that unit costs may vary
considerably depending on the scale of the service you are
providing – so don’t lose confidence in your calculations (the
variability has something to do with the extraordinary flexibility
in the way the third sector is managed, staffed and supported
by volunteers)
• don’t fiddle the figures; if you want to cross-subsidise one
service with income from another source it is still important to
know accurately how much the service is costing you – you can
deduct the subsidy later when you fix the price you intend to
charge the customer.
7. Calculating the real hourly rate: The actual cost of employing a
member of staff involves a great deal more than their basic hourly
rate. For example:
A full time care assistant paid £10 per hour who is paid for 37
hours per week, 52 weeks per year might cost you:
£10 x 37 x 52 = £19,240
employer’s National Insurance contribution, say £1,924
recruitment costs, say £600
Total £21,764
To establish the real hourly rate you calculate the total number of
hours paid for:
37 x 52 = 1924 hours
and deduct the non productive hours, say 20 days leave, plus 8
days public holiday plus 2 days training, which is 30 days or 6
weeks =
37 x 6 = –222 hours
so the total hours worked = 1924 – 222 =
The cost to you of each productive hour worked is:
1702 hours
£21,764 ÷ 1702 = £12.79/hour
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