Timekeeping Methodologies

Acceptable Accounting Methods

Total Time Accounting -- Effective Hourly Rate Method

Computing a separate average labor rate for each labor period, based on the salary paid divided by the total hours worked during the period.

For instance, Joe is paid $2000 per pay period, and normally works 40 hours per period. He is paid $50 per hour. However, he is an exempt employee, so if he works 50 hours, he still only gets $2000 per pay period.

When Joe works 50 hours in a pay period, his effective hourly rate is now, $40 per hour.

When bidding costs, effective hourly rates must be considered/bid, or if they are not utilized, the contractor must disclosure and utilize an uncompensated ratio.

Related Topic Uncompensated Overtime

Uncompensated Overtime - DCAA Contract Audit Manual, Chapter 6.

https://www.dcaa.mil/Portals/88/Documents/Guidance/CAM/Chapter%206%20Incurred%20Cost%20Audit%20Procedures.pdf?ver=w1fAhN5viZxxSrFZNWJP8A%3D%3D

SEE 6-410 Evaluating Uncompensated Overtime **

Pro Rata Allocation

Determining a pro rata allocation of total hours worked during the period and distributing the salary cost using the pro rata allocation. For example, if an employee was paid on a weekly basis and worked 25 hours on one cost objective and 25 hours on another cost objective, each cost objective would be charged with one-half of the employee's weekly salary.

Standard Hourly Rate

Computing an estimated hourly rate for each employee for the entire year based on the total hours the employee is expected to work during the year and distributing salary costs to all cost objectives worked on at the estimated hourly rate. Any variance between actual salary costs and the amount distributed is charged/credited to overhead.

Other Possible Accounting Methods

Other methods of accounting for excess hours worked by exempt employees may be used by the contractor. Some of these are unacceptable and others require further evaluation to determine acceptability. Examples of methods that would require further evaluation are:

(1)distributing the salary cost to all cost objectives based on a labor rate predicated on an 8-hour day/40-hour week and crediting the excess amount distributed to overhead; (Author comment: This is really prorata stated above).and

(2)determining a pro rata allocation of hours worked each day and distributing the daily salary cost using the pro rata allocation (use of daily distribution increases the possibility for "gaming"). Evaluation should be made of the method used by the contractor to determine the significance of any inequities which may result.