If you manage an agency, chances are you have come across the term ‘utilization rate’ at strategy meetings and quarterly reviews, or any time discussions of profitability become serious. You may even be using a spreadsheet to track your utilization rate. Well, here comes the hard truth: in all likelihood, you are tracking utilization incorrectly or, at the very least, not fully.
There is a standard formula that everyone uses, which appears to be simple to follow on paper: (Total Billable Hours / Total Available Hours) x 100 = Utilization Rate. As long as the data that is being put into the calculation is correct, this formula will give you accurate information. Unfortunately for the majority of agencies, the time-tracking data is not accurate. Agencies do not always fill out time logs in a timely manner; non-billable work gets recorded incorrectly, and many times employees will not enter small amounts of time that are actually billable (e.g., if you have a client that calls you asking a question and it only takes 15 minutes of your time, or if you spend 1 hour fixing a project that you completed 2 weeks prior).
Therefore, your billable utilization can be skewed, and this figure can cease to be a useful metric — rather, it becomes a number that you are using to manage your agency rather than a number that you are learning from.
This guide will provide you with a better understanding of what your billable utilization is and how to accurately calculate it using the formula for utilization rate, and discuss what a ‘good’ utilization rate looks like in practice.
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What Is Utilization Rate (And Why It Actually Matters)
In service-based businesses, agencies, consultancies, law firms, and creative studios, time is literally the product. You’re not selling widgets. You’re selling the attention, expertise, and effort of your people. If a significant chunk of that time isn’t going toward work that clients are paying for, your margins shrink- Fast!
The problem is that most agencies look at billable utilization as a performance scorecard rather than a diagnostic tool. They see a team member at 65% utilization and assume that person isn’t working hard enough. But low utilization could just as easily mean poor project allocation, too much administrative overhead, unclear role expectations, or a mismatch between what someone’s good at and what they’re being assigned.
A properly tracked utilization rate doesn’t just tell you how busy people are. It tells you whether the way you’re running projects, assigning work, and structuring roles is actually sustainable.
How To Calculate Utilization Rate (The Right Way)
The formula for the utilization rate is straightforward. To measure productivity accurately, take the total number of billable hours an employee worked in a given period, divide it by their total available hours in that same period, and multiply by 100 to get a percentage.
Here’s the formula for capacity utilization written out:
Utilization Rate = (Billable Hours / Total Available Hours) × 100
Let’s say a designer has 40 hours available in a week and logs 30 billable hours. Their capacity utilization for that week is 75%. Clean, simple, useful.
But here’s where most agencies mess it up. That calculation only works if both numbers, billable hours and total available hours, are accurate. And in most agencies, they’re not. Billable hours get rounded, guessed, or logged days after the work happened. Total available hours don’t account for PTO, meetings that ran long, or the fact that someone spent three hours on an internal project that should have been tracked differently.
The result is a billable utilization that looks fine on a dashboard but doesn’t reflect reality. You end up making resourcing decisions based on incomplete data, which leads to overworked team members, underpriced projects, and profitability that never quite matches the forecast.
What Is a Good Utilization Rate? (It Depends More Than You Think)
Ask ten agency owners what a good billable utilization looks like, and you’ll get ten different answers. Some will say 70%. Others will insist on 85%. A few will admit they’re aiming for 90% and quietly burning their teams out in the process.
The reality is that what counts as a good utilization rate depends entirely on the role, the type of work, and how your agency is structured. A junior designer whose job is purely execution-focused should have a higher billable utilization than a creative director who spends half their week in client meetings, reviewing work, and managing the team. Both are doing valuable work. One of them just isn’t billable for most of it.
Industry benchmarks suggest that agency utilization rates typically sit somewhere between 70% and 80% for most billable employees. Go much lower than that, and you’re likely dealing with either poor project allocation or too much non-billable overhead. Push much higher than 85%, and you’re risking burnout, because people need time for internal work, skill development, and the occasional break to not hate their job.
Here’s what makes a utilization rate ‘good’ in practice: it’s sustainable, it’s role-appropriate, and it’s based on accurate data. A senior account manager at 50% utilization might be exactly where they should be if the other 50% is spent winning new business and managing client relationships. A developer at 95% utilization for three months straight is a retention problem waiting to happen.
The goal isn’t to hit some magic number. The goal is to know what your team’s actual utilization looks like so you can make better decisions about hiring, pricing, and project scope.
Why Most Agencies Get Utilization Rate Wrong
The biggest issue with utilization tracking isn’t the math. It’s the data. Most agencies rely on self-reported time logs filled out manually at the end of the day, the end of the week, or, let’s be honest, right before the project deadline, when someone finally remembers they were supposed to be tracking hours.
Manual time tracking is inherently unreliable. People forget what they worked on. They round to the nearest half hour. They skip logging the small tasks that add up. And when the data going into your capacity utilization calculation is incomplete or inaccurate, the number you get out is useless.
Another common mistake is treating all hours the same. Not all billable hours are created equal. An hour spent on a high-value retainer client is worth more to your agency than an hour spent firefighting scope creep on an underpriced project. But most utilization tracking doesn’t distinguish between the two. You just see ’32 billable hours’ and assume everything’s fine.
Finally, most agencies don’t track non-billable work in a way that reveals patterns. If your team is consistently spending 15 hours a week on administrative tasks that could be automated, streamlined, or delegated, that’s a structural problem — not an individual performance issue. But if you’re only looking at utilization as a percentage, you’ll miss it entirely.
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How EmpMonitor Helps You Track Utilization Rate?
EmpMonitor is a workforce management and employee monitoring platform built to solve exactly this problem. It tracks how employees spend their time automatically, categorizes work as billable or non-billable, and surfaces the real patterns that manual time logs miss.
Automatic Time Tracking That Reflects Reality
EmpMonitor records active work hours in real time, tracking when employees start working, when they stop, and how their time is distributed across tasks and applications. Instead of relying on someone to remember what they did on Tuesday afternoon, you get an objective record of where the hours actually went.
This means your utilization rate is based on real data, not estimates. If a designer logs 28 billable hours in a week, you know those are genuine billable hours — not a best guess filled in three days later.
App and Website Usage for Granular Visibility
One of EmpMonitor’s most valuable features for tracking utilization is its application and website monitoring. It shows you not just how many hours someone worked, but what they were actually doing during those hours. If an employee is technically ‘working’ for 40 hours a week but spending 10 of those hours on non-work sites, their real utilization is significantly lower than what their timesheet says.
This level of visibility helps you distinguish between employees who are genuinely overloaded and employees who are simply inefficient, which is critical when you’re making decisions about staffing, pricing, and project timelines.
Billable vs. Non-Billable Classification
EmpMonitor makes it easy to categorize time as billable or non-billable at the task level, which means your utilization rate reflects the actual breakdown of revenue-generating work versus internal overhead. You can see at a glance which team members are spending too much time on admin, which projects are eating into profitability, and where process improvements would have the biggest impact.
Live Dashboard and Trend Analysis
Rather than waiting until the end of the month to discover that utilization was lower than expected, EmpMonitor’s live dashboard gives you real-time visibility into how your team is tracking. You can spot patterns as they’re forming — a developer whose billable hours have dropped three weeks in a row, a project manager whose non-billable time is creeping up — and address the issue before it becomes a bigger problem.
HRMS Integration for Complete Workforce Context
EmpMonitor integrates with HRMS platforms to pull in leave data, attendance records, and performance history, allowing organizations to utilize employee monitoring in a structured and contextual way. Instead of relying on isolated data points, you get a complete picture of workforce utilization. This means you’re not just calculating utilization rates in a vacuum — you’re viewing them alongside workload distribution, capacity trends, and overall team health for more informed decision-making.
What To Actually Do Once You Have Accurate Utilization Rate Data
Having accurate utilization data is only useful if you act on it. Here’s what that looks like in practice.
If utilization is consistently low across the team, that’s a signal to audit your project pipeline. Are you pricing work correctly? Are you saying yes to the right clients? Are internal processes eating up time that should be billable? Low utilization isn’t always a people problem — it’s often a business model problem.
If utilization is unevenly distributed — some people at 90%, others at 50% — that’s a resourcing problem. You need better project allocation, clearer role definitions, or potentially a different team structure. EmpMonitor’s reporting makes it easy to see where the imbalances sit so you can redistribute work fairly.
If utilization is consistently high but profitability isn’t where it should be, you’re likely dealing with scope creep, underpricing, or too much rework. Accurate time data helps you identify which clients or project types are the culprits so you can adjust pricing, tighten scopes, or walk away from unprofitable work.
Final Thoughts
(UR) is often the most important metric to measure an agency against its competition and track performance. However, it only serves as a performance metric if the underlying data (time logs) are accurate. Manual or retroactive time logs or incomplete or inaccurate tracking of work done for clients and billable hours limit agencies ability to use UR for diagnostic purposes. The result: your agency is managing a number rather than truly understanding how to grow their business.
Fixing this issue is easy but requires a firm commitment. Implement and use automated time tracking tools instead of relying on manual time logging. Train staff to determine the difference between billable and non-billable work so that UR data is accurate. On a frequent basis (once per month or so), review utilization reports not for punishing staff who were not fully utilized, but rather to recognize if there are systemic issues that result in inconsistent UR tracking accuracy.
When agencies have access to accurate UR data, they can stop making resourcing decisions based on their gut feelings and begin making evidence-based decisions about resourcing. Agencies are then able to accurately price projects, distribute workloads fairly and determine if someone has reached burnout versus has left the agency before they leave.
That is why Capacity utilization (CU) should be one of the first metrics tracked/monitored.
Frequently Asked Questions
What will happen if my total utilization rate stays above 85% or 90%?
When your total utilization rate is above 85% or 90%, it can indicate that you have too much work and employees may be on the verge of being burned out. Employees need time to do non-billable work, which could include things like developing their skills and working through internal meetings, as well as occasionally taking a mental break. If the total utilization rate is frequently rising above sustainable levels, you may need to hire more employees, decline work, or allocate work among your team members more evenly.
Do all of my employees need to have the same total utilization target?
No. Total utilization targets should be based on each employee’s role. For example, a junior designer who is only focused on execution will have a target of about 75% – 80%, whereas a senior account manager, who spends half their week acquiring new businesses and managing client relationships, will have a target of approximately 40% – 50%. While both are performing valuable work for the organization, one is more directly billable then the other.
Can I track total utilization rates for my entire agency, or only for individual employees?
You can track both. The total capacity utilization for the agency is the average utilization rate of all employees combined (i.e., adding all employee UR together and dividing by the number of employees). This will provide you with a big picture view of overall efficiency. Tracking individual employee utilization rates will provide you with insight to any imbalances with resources and workload issues.
