Definition
The term benefit per man refers to some metric which assesses the efficient utilization of employees. Profit a person is very helpful for organizations which have a comparatively large percentage of labour expenses.
Calculation
Profit per Person = Net Income / Full Time Equivalents
Where:
- Net income is equal to earnings revenues minus expenses, including depreciation, interest, and taxes.
- Full Time Equivalents is add up to the same number of men working regular tasks at a provider. By way of instance, two employees working 20 hours each week could be corresponding to a full time equivalent working 40 hours each week.
Explanation
Operating performance measures permit the investor-analyst to comprehend how well an organization is performing depending on earnings, gross profits, and profits. One of those techniques to assess the potency of an organizations core business is by simply calculating their profit each person.
Also known as profit per FTE, profit per man is a helpful benchmarking metric for businesses which have relatively large labour expenses. By way of instance, the sustainability of a business in the professional services industry is related to the efficient and productive utilization of employees. This metric is much more indicative of operation than measures such as earnings per person, as it not only considers earnings earnings generated by employees, but also their capacity to show people earnings into profits. After calculating this metric, all employees needs to be considered, for example full and part-time contractors, employees and services that are outside.
Example
Company ABC’s primary operating officer wanted to understand the potency of the business ‘s labour pool by simply calculating their profit per man with time. These rules were created with this particular metric:
- Each fulltime worker is equal to a FTE
- Two Parttime workers will be equivalent to a FTE
- The Entire builder hours charged Monthly is split from 168 to Find out that the Whole amount of builder FTEs
- All of the Regular hours for many other external support is split from 168 to Ascertain that the Entire variety of external providers FTEs
