Post-costing answers two questions. The first — was the project profitable? — interests executive management. The second — which assumption was wrong? — is the one that actually generates profit.
Data Foundation
For a reliable comparison, you need:
- Hours worked per person, day, and work package,
- Internal cost allocation rates effective at the time the work was performed,
- External subcontractor services attributed to the project,
- Project-related direct costs including travel and subsistence expenses,
- Revenue, including approved change requests and supplementary client orders.
The critical factor is consistently working time recording. Under the Working Time Regulations 1998 (WTR 1998) and standard UK employment compliance, maintaining accurate, contemporaneous time records is essential. If hours are logged as lump sums, recorded late, or omitted entirely, post-costing turns into mere guesswork — and will reliably validate whatever your initial estimate happened to be.
Structure of the Comparison
| Level | Planned | Actual | Variance |
|---|---|---|---|
| Work Package A | 120 h | 145 h | +25 h / +21 % |
| Work Package B | 80 h | 62 h | −18 h / −23 % |
| Work Package C | 200 h | 264 h | +64 h / +32 % |
| Total Hours | 400 h | 471 h | +71 h / +18 % |
| External Services | £8,000 | £9,500 | +£1,500 |
| Revenue | £56,000 | £56,000 | £0 |
Evaluating data solely at the overall project level is insufficient. Only a breakdown by individual work packages reveals where effort was actually expended — and whether an overrun in one area was merely obscured by an accidental under-budget performance in another.
Three Types of Variances
Quantity Variance (Volume Variance). More hours were needed than planned. Root causes: underestimated scope, rework, or unclear client requirements.
Price Variance (Rate Variance). Hours were delivered by higher-cost personnel than originally budgeted — senior instead of junior staff. The root cause typically lies in resource allocation and capacity scheduling, not the initial quotation estimate.
Structural Variance (Mix Variance). The proportion of non-directly value-adding activities — coordination, meetings, documentation, travel — was higher than anticipated.
Distinguishing between these categories is essential because each demands a different corrective action: a quantity variance is addressed in your estimation methodology, a price variance in staffing and resource planning, and a structural variance in your overarching cost calculation model.
Typical Root Causes
| Root Cause | Characteristic Indicator |
|---|---|
| Scope Creep | Effort increases continuously, but the project scope was never formally renegotiated |
| Incorrect Skill Allocation | Senior hours booked against a role budgeted at junior charge-out rates |
| Rework | Disproportionate hours logged during the final delivery phase |
| Underestimated Coordination | High proportion of internal meetings and coordination entries |
| Incorrect Overhead Surcharge | Systematic variance across all projects |
The last point is particularly critical: If the exact same variance appears across every project, the issue does not lie within individual project execution, but within your overarching cost calculation and overhead recovery model.
Contribution Margin per Hour
Far more informative than the absolute contribution margin is the contribution margin per actual hour worked. It makes projects of varying sizes directly comparable and answers the fundamental strategic question: Which type of contract maximizes the return on your scarce resource of time?
Contribution Margin per Hour = (Revenue − Direct Costs) ÷ Hours Worked
Recommended net hourly rate
56,82 €
per hour
Total billable hours: 1.056 hrs/year
Why calculate manually?
PlainStaff tracks work and project hours fully automatically, calculates mandatory breaks compliantly, and saves your business valuable hours every week.
Free trial • No credit card required
The Feedback Loop
Post-costing that is not fed back into the next preliminary calculation is wasted effort. A practical review cycle includes:
- Per project immediately after completion — document variances and their root causes.
- Quarterly across all completed projects — identify overarching patterns and trends.
- Annually adjust calculation baselines: productive/billable hours, overhead recovery markups, and estimation adjustment factors per work package category.
The estimation factor is the most powerful tool here: If projects of a specific type consistently run 18 per cent over budget on average, applying an 18 per cent adjustment to future estimates of that type will prove far more accurate than attempting to endlessly refine your initial estimation methodology.
Prerequisite: A Robust Project Breakdown Structure
The project structure must be designed so that time and expense bookings remain unambiguous. Overly coarse structures — such as a single work package for the entire project — yield no actionable insights. Overly granular structures lead to misallocated time entries and corrupt data quality. As a rule of thumb: a single work package should encompass at least 20 hours and at most 200 hours.
Sources and Legal Foundations
Statutory Regulations and Accounting Standards
- Companies Act 2006 & UK GAAP / FRS 102 (Section 13) / IAS 2 — Valuation principles, capitalisation rules, and determination of production costs, including the allocation of direct labour and attributable overheads.
- Working Time Regulations 1998 (SI 1998/1833) — Statutory duties regarding working hours, maximum weekly limits, rest breaks, and employer record-keeping requirements (Regulation 9).
- National Minimum Wage Act 1998 (NMWA) — Mandatory retention of complete and accurate working time records to substantiate compliant hourly pay across all work packages.
Further Standards and Official References
- HMRC Record-Keeping & Making Tax Digital (MTD) Guidelines — Statutory requirements under the Taxes Management Act 1970 and Value Added Tax Act 1994 for maintaining complete, immutable, and audit-proof digital records, expense vouchers, and accounting books for at least 6 years.
- Office for National Statistics (ONS) — Labour Costs and Earnings Data — Official UK benchmark statistics on total labour costs, employer National Insurance contributions, and statutory non-wage labour expenditures.
Status of analysis: August 2026.
Frequently asked questions
- Author
- PlainStaff Editorial Team
- HR Editorial Team
- Updated on