Non-billable resources (e.g., support staff, admin teams, project overhead) are an essential part of delivering projects but can be difficult to allocate fairly. Organizations use several approaches to capture and distribute these costs. Below are the most common methods, along with alternatives you can consider.
1. Distribute Costs Across Billable Hours (Admin Charge Method)
This is the most widely used approach. You calculate the total non-billable support cost for projects, then spread it across available billable hours.
Example:
10 billable resources with a target utilization of 80% per year = 13,440 available hours
Non-billable project support = USD 100,000
Admin charge per billable hour = USD 7.44
This admin charge is added to the actual cost rate of each individual as an overhead.
✅ Simple to apply
⚠️ May create operational variances if actual utilization differs from budget
2. Create a Non-Billable Work Package Within Each Project
Instead of adding an admin charge, you can set up a non-billable work package for every project. Allocate budgeted hours (with zero value) for non-billable support tasks and internal cost tracking.
Non-billable resources log their time here
Project margins reflect both billable and non-billable effort
A common practice is to allocate around 10% of project costs to support time (if this cannot be charged separately to the client)
✅ Clear visibility at the project level
⚠️ Requires discipline to budget and track separately
3. Track Non-Billable Work in an Internal Project
Another approach is to create an internal project to track non-billable hours.
Hours are categorized by the type of non-billable work (e.g., admin, training, project support)
Reporting is usually aligned with the financial year and organized per department
While this method doesn’t tie support hours to individual projects, it provides visibility into overall effort spent on non-billable activities
✅ Good for department-level insights
⚠️ Doesn’t show impact on individual projects
4. Use a Blended Rate (Pooled Costing)
With this method, you incorporate non-billable costs into the overall hourly sell rate instead of tracking them separately.
Example:
If your base sell rate is $100/hour and admin overhead is $7.44/hour, your blended rate would be $107.44/hour.
✅ Simplifies pricing and budgeting
⚠️ Reduces visibility into how much non-billable effort is really being used
5. Apply Overhead Allocation at the Project Level
Allocate a standard overhead percentage to every project (e.g., 10–15% of direct costs).
Works well if support costs are relatively stable across projects
Gives predictable cost recovery without detailed time tracking
✅ Easy to forecast
⚠️ Less accurate for projects with unusual support needs
6. Charge-Back Model for Shared Services
In this approach, internal support teams (such as QA, PMO, or IT) “invoice” projects for the services they provide.
Keeps costs transparent
Encourages project managers to plan for non-billable support from the start
✅ Maintains accountability for shared services
⚠️ Can add administrative complexity
7. Value-Based Estimation
Instead of logging actual non-billable hours, estimate expected support at the start of the project and build it into the budget.
Useful for predictable, repeatable tasks (e.g., onboarding, reporting, project governance)
Keeps project costing aligned with expected value delivered
✅ Practical for standardized work
⚠️ Not as precise if actual support varies widely
Key Takeaway
There’s no single “right” method — the best approach depends on your organization’s size, project types, and reporting needs. Many teams even use hybrid models, for example:
Applying a blended rate for small projects
Using non-billable work packages for large or strategic projects
Tracking department-level support separately for internal reporting
👉 Remember: what you measure improves. Accurately attributing non-billable resource costs leads to more realistic project margins and stronger decision-making.