One way to find a better work-life balance is to earn more and work less. What is the secret to this mythical strategy, aside from starting your own highly successful, incredibly lucrative, completely flexible consulting business? Ahhh, sure. You don’t have to quit your job or start a business. You just need to understand something called your effective hourly rate. This is not the same as your hourly wage or even your salary. It’s something much more comprehensive and accurate in understanding how much you make per hour. If you understand this essential metric, you can learn to increase your earnings and reducing your overall work time. Whether you’re a salaried worker, self-employed, or an hourly worker, you need to know your effective hourly rate, if you want to start getting paid more for your time.
What Is Your Time Really Worth?
What you get paid per hour isn’t really what you earn per hour. We often focus on paychecks, hourly rates, reimbursement rates, or client fees. You should think of your hourly rate as the harvest of your garden. It’s what you pick when it’s ripe but it doesn’t account for all the work that goes into raising that crop.
What goes into raising your crops? Let’s think about this. Think of everything that goes into your work , that is the effective hourly rate (EHR). Effective hourly rate is all the time, paid and unpaid, that goes into what you earn per hour. Let’s take an example from my field, mental health. Insurance reimburses about $80 for a 45-minute psychotherapy session. But that’s not the time effective hourly rate. Let’s look at what goes into this.
45 minutes of time with patient
5 minutes of scheduling
10 minutes of client documentation after the appt
15 minutes of insurance paperwork
15 minutes of average fighting with the insurance company who want to deny your claim
That totals 1.5 hours, so at the most this therapist is making $53/per hour, very different from the original $107/hour rate.
A simpler way to get your EHR is to calculate all your time connected to work, divided by your income. Include everything you do. Include activities that don’t make money, like marketing, free consultations to clients, time spent with clients who fail to pay, etc. Include activities that you do at home and in the office. It doesn’t matter. It’s all time. All the bullshit you do at home for work is work. Work that requires time away from other things, so count it: checking emails, planning a presentation, prepping equipment, it doesn’t matter.
Calculate Specific Effective Hourly Rates
You could you use the general EHR of all work vs. pay but this may miss out on a lot of information. I was helping a friend to get away from insurance and build a fee-for-service business. She found that some insurers were much worse than others, eating up hours of time for every client, not paying, or even reversing pay decisions after initially agreeing to pay. By calculating an effective hourly rate for each of these, she could determine which insurance companies were paying the most, when you consider all the time that goes into finally getting paid. Calculating an EHR for specific activities can let you determine which activities are most profitable and which are least profitable. EHR comes in handy with retainer fees for lawyers, workshop fees for presenters, or any kind of contracted work.
Effectively Hourly Rate For Salaried Workers
You might find think that EHR doesn’t apply to salaried workers but it does, even though most salaried workers rarely consider it. After-hours work eats away the EHR for salaried works. Let’s say you bring in $2000 every week and work 60 hours per week. That means your effective hourly is $33 per hour, even though your employer pays you at 40-hour per week, which is $50/hour.
You can use EHR to compare two jobs you are applying for or deciding whether leaving your current job for another job. You should consider your EHR rather than just the salary itself. Sometimes, larger salaries come with more responsibilities that lower your EHR. I was once offered a job promotion that would have given me a $10,000 pay raise but it would require at least 10 extra hours per week. That would mean an extra $208 per week (considering that I work about 48 weeks per year). That ends up being $21/hour, which is far below my regular hourly wage. If I worked an extra 15 hours that would mean I’d make $14/hour!!!!!!!
What Good Is The Effective Hourly Rates If Your Stuck In A Job?
Considering that you often can’t dramatically change your job the EHR is useless, right? Wrong! You can improve your EHR by working more effectively. Consider how to reduce your workload and get things done in less time: delegate more, study time management, stop being a perfectionist, learn to pick your work battles more wisely, reduce time wasters (like email, social media, and other distractions).
A big return on EHR is reduced meetings. Get out of as many meetings as possible. These time sucking vampires almost always drain precious time away from productive work and can be eliminated or greatly reduced. Don’t set up meetings unless all other options have failed. Send communications by email, meet with people individually, plan things yourself and avoid a meeting. Hide in the bathroom when others are trying to get you to agree to a meeting – don’t forget to put your feet up on the toilet too, in case someone looks under the stalls.
Another tactic is strict scheduling. Set limits for when you arrive and leave work and stick to it like your life depended on it. If you have flexible time boundaries, you will allow bullshit to keep you at work – coworkers or clients who want things at the last minute, non-sense paperwork tasks that can just wait, or dilly dallying because you don’t have to use your time well. There is a principle called Parkinson’s law and it states that meetings expand to fill the available time. Well, the workday expands to fill the available time too. Stick to an 8-hour work day and magically things will get done.
Commute Time And Effective Hourly Rate
Most people think your hours at work start when you enter the office. Nonsense. Your commute should be considered as part of your EHR. If you spend, 10 hours a week commuting to work, that is part of your work schedule. There may be other jobs that are closer or allow you to work from home some or all the time. Consider the time commuting to work on cars, buses, trains, bicycles, unicycles, airplanes, and hot air balloons. That’s time you could be with your family, vacationing, working for more money, watching Netflix, exercising, reading, and so on.
Bonuses And The Effective Hourly Rate
In my job, I have heard people complain about not getting bonuses. Just getting a bonus is great but incentive bonuses are usually great returns for employers but not for employees. Figure the effective hourly rate for a bonus and you’ll be surprised. A $500 bonus at end of the year might take 50 extra hours of work. That’s a whopping $10/hour for your efforts. You could do a side job and make far more or just say screw it, I want that time with my family. It’s not worth it.
Take Control Of Your Time
Research shows that almost all psychotherapies tend to be equally effective when they are well executed. The problem is just executing them well. What this means is just do something and commit to it. I can guarantee you that if you start trying to improve your effective hourly rate by paying attention to how you use your time and experimenting with different strategies, something will improve. It doesn’t matter what you do, just do something. Well, it’s not as catchy as Nike’s slogan but it the truth.
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