Cost Structure Overview
Total Labour Cost vs. Industry Benchmark
Labour represents 72.4% of total revenue — 3.8pp above the professional services industry benchmark of 68.6%. The gap is driven by below-benchmark utilisation rates and above-market salaries in the Operations and Project Management functions.
Labour Cost as % of Revenue: Ours vs. Industry
Total Cost Composition (% of Revenue)
| Cost Component | Our Cost ($M) | % of Revenue | Industry % | Variance | Status |
|---|
| Base Salaries | $18.42M | 52.6% | 50.2% | +2.4pp | Over |
| Benefits & Super | $3.32M | 9.5% | 9.0% | +0.5pp | Over |
| Variable / Bonus | $2.24M | 6.4% | 5.8% | +0.6pp | Over |
| Contractors & Temps | $1.40M | 4.0% | 3.6% | +0.4pp | Over |
| Overheads (Non-Labour) | $5.08M | 14.5% | 15.8% | −1.3pp | Under |
| Total Operating Cost | $30.46M | 86.9% | 84.4% | +2.5pp | Over |
Salary by Function
Average Salary vs. Market Median by Function
We pay above market in Operations (+12%) and Project Management (+9%) but below market in Technology (−6%) and Data & Analytics (−8%), creating retention risk in high-demand functions and overspend in delivery roles.
Avg Salary ($K): Ours vs. Market Median
Salary Premium / Discount vs. Market (%)
| Function | Headcount | Our Avg ($K) | Market Median ($K) | Premium | Total Salary ($M) | Excess vs. Mkt ($K) |
|---|
Utilisation & Effective Cost
Billable Utilisation & Effective Hourly Cost by Function
Utilisation is the key multiplier in a people business. Our blended rate of 68.2% vs. industry 74% means we absorb 5.8pp more idle time cost. When adjusted for utilisation, Operations' effective hourly cost is $142 — 28% above the industry-adjusted rate of $111.
Billable Utilisation % by Function (Industry: 74%)
Effective Cost per Billable Hour ($)
| Function | Utilisation % | Industry % | Gap | Annual Hrs | Billable Hrs | Eff. $/Hr | Ind. Eff. $/Hr |
|---|
Project Economics
Labour Hours & Cost Allocation by Project Type
Transformation projects consume the most hours (38%) but have the lowest cost recovery ratio at 0.91x — meaning we spend $1.10 in labour for every $1.00 billed. Advisory and Managed Services both recover above 1.0x.
Hours & Labour Cost by Project Type
Cost Recovery Ratio by Project Type (1.0x = Break-Even)
| Project Type | Hours (K) | % of Total | Labour Cost ($M) | Revenue ($M) | Recovery Ratio | Industry Ratio | Variance |
|---|
| Advisory & Strategy | 42.6K | 18% | $4.82M | $6.14M | 1.27x | 1.22x | +0.05x |
| Managed Services | 58.4K | 24% | $5.46M | $6.48M | 1.19x | 1.15x | +0.04x |
| Implementation | 48.2K | 20% | $5.18M | $5.42M | 1.05x | 1.10x | −0.05x |
| Transformation | 91.8K | 38% | $9.92M | $9.02M | 0.91x | 1.08x | −0.17x |
| Total | 241.0K | 100% | $25.38M | $27.06M | 1.07x | 1.12x | −0.05x |
Seniority & Grade Mix
Headcount & Cost Distribution by Seniority Level
We are top-heavy relative to industry: 28% of headcount is Senior Manager or above (vs. 22% industry), driving up the blended cost per head. The mid-level layer (Consultant / Senior Consultant) is thinner than benchmark, creating a leverage gap.
Headcount Mix: Ours vs. Industry
Avg Salary by Seniority Level ($K)
| Seniority Level | Headcount | Our Mix % | Industry Mix % | Gap | Avg Salary ($K) | Total Cost ($M) |
|---|
| Partner / Director | 14 | 7% | 5% | +2pp | $248K | $3.47M |
| Senior Manager | 42 | 21% | 17% | +4pp | $168K | $7.06M |
| Manager | 38 | 19% | 20% | −1pp | $128K | $4.86M |
| Senior Consultant | 48 | 24% | 28% | −4pp | $96K | $4.61M |
| Consultant | 36 | 18% | 20% | −2pp | $74K | $2.66M |
| Analyst / Graduate | 22 | 11% | 10% | +1pp | $58K | $1.28M |
| Total | 200 | 100% | 100% | — | $119K | $23.94M |
Cost Trend
Quarterly Labour Cost Ratio & Utilisation Trend
Labour-to-revenue has crept up from 69.8% in Q1 2023 to 74.1% in Q4 2024, while utilisation has declined from 72% to 66%. The divergence shows revenue is not keeping pace with headcount growth — a classic professional services margin trap.
Labour % of Revenue & Utilisation % — Quarterly
People Cost Scorecard
Labour Efficiency Radar vs. Industry Benchmark
We trail industry benchmarks on utilisation (58 vs 80), seniority leverage (55 vs 78), and cost recovery (62 vs 75). Salary competitiveness scores higher because we pay above market in most functions.
Labour Efficiency Score vs. Industry (100 = Best-in-Class)
Key Insights & Cost Optimisation Priorities
- Utilisation is the #1 lever — closing 5.8pp to industry standard recovers ~$920K. At 68.2% vs. 74% benchmark, we absorb 14,000+ non-billable hours annually. The gap is concentrated in Operations (62%) and Project Management (65%). Implement weekly utilisation tracking and bench management protocols.
- Transformation projects are loss-making at 0.91x recovery — consuming 38% of all hours but billing below cost. The root cause is scope creep and understaffing with junior resources (top-heavy team composition). Shift 15% of Transformation hours from Senior Manager to Senior Consultant grade to improve the blended rate.
- Operations and PM functions are 9–12% above market salary — contributing $482K in excess labour cost. Given these are not revenue-generating client-facing roles, market-rate realignment at next review cycle would save $320K without impacting client delivery.
- Technology and Data & Analytics are 6–8% below market — creating acute retention risk in the two highest-demand functions. Attrition data confirms: Technology turnover is 24% vs. 18% company average. A targeted salary uplift of $180K would reduce replacement hiring costs of ~$420K.
- Top-heavy seniority mix adds $680K in excess cost — 28% of headcount at Senior Manager+ vs. 22% industry. The leverage ratio (senior:junior) is 1:1.8 vs. industry 1:2.6. Hiring 12 additional mid-level consultants while holding senior headcount flat would shift the mix to benchmark within 18 months.
- Labour cost ratio has risen 4.3pp in eight quarters — from 69.8% to 74.1%. Without structural intervention, the trajectory reaches 76% by end of FY 2025, compressing operating margin to under 10%. A freeze on senior hires combined with utilisation improvement is the fastest corrective action.
- Non-labour overhead is a bright spot at 1.3pp below benchmark — the team has been efficient on facilities, technology, and travel. Protect this advantage; do not solve the labour cost problem by cutting overhead further.