Basing hourly wages on 52 weeks or 2080 hours a year is a misleading oversimplification that we’ve all fallen for. Albeit a seemingly minor one, it’s a mathematical error that could be costing your budget thousands of dollars every year.
If it were up to us, we would change the game and stop using 2080 in our application’s budget builder, since it actually only equates to 364 days. But I can say with absolute certainty that some clients would come down on us with the fire of a thousand suns for not using 2080, because it’s the standard. If anything should be as accurate as possible, it’s your proposed labor budget. But it’s going to take an entire industry to agree to change their way of thinking.
Our eyes were opened to the 2080 flaw at the end of 2015. Our clients started running the BalancedComp app’s budget builder to get 2016 numbers and couldn’t understand why the final totals were slightly higher than the annualized totals (which are strictly based on 365 days). We quickly realized 2016 was a leap year, so there was an extra day included in the final totals.
Problem Solved. Right?
Well, it was, until we went all ‘Beautiful Mind’ on the office windows trying to figure out how we could ensure one day of wages was being accurately calculated.