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Chapters
Planning and setting up your cost structure
Setting up costing for your employees
Costing through the Smartly app and changing costing details in a pay packet
Exporting pay details to Xero
Costing report

Labour costing guide

Labour costing shouldn't be hard work! This guide shows you how to set up your Smartly site so you can assign employee hours across accounts, departments and jobs.

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Contents of this guide

To download a PDF copy of this guide, click here.

1. Planning and setting up your cost structure

2. Setting up costing for your employees

3. Costing through the Smartly app and changing costing details

4. Exporting pay details to Xero

5. Costing report

Planning and setting up your cost structure

Smartly’s costing structure has three tiers, allowing you to split your costs across different accounts, departments and projects or jobs.

1 . Account – These are your highest-level cost allocations such as Wages or Bonuses.

2. Departments – This lets you break your labour costs down further by team or department for example.

3. Project/Job – Details related to specific projects or jobs. 

For example, a small business offering plumbing services may have the following structure:

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Before you start your set up, we recommend planning your costing structure first. Using a simple flow chart like the one above, or laying it out on a spreadsheet, will make the set up a lot easier.

Note: We'll refer back to this example cost structure throughout the guide to describe different scenarios.

Setting up your cost structure

To set up your cost structure go to 'Departments/Jobs' in the 'Company details' section. You will see a default item called 'Department1' which you can either delete or rename during the set-up process.

Using the example of the plumbing company above, the steps below show you how to set up a single three-tiered cost structure.

1. Go to Company details and choose Departments/Jobs.

2. Click on the + icon next to 'Company' to set up your 1st tier (i.e. your highest level cost allocations) and a pop-up window will appear.

3. Name it using the 'Description' field (e.g. Wages) and enter your account code matching the details to your general ledger. You can also create 'Quick codes' to make it easier to add costed items in the 'Pay details' screen when you're running a pay (refer to the image below). Click Save.

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4. Next, create your 2nd tier (i.e.Department) by clicking on the + icon next to your tier 1 item (e.g. Wages) and follow the same process as steps two and three above.

5. Finally, add the jobs/projects that fall under each of your departments using the + icons next to each, again following the same process as steps two and three. 

Your structure should now look something like this. You can set up as many tiers as your business needs.

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Setting up costing for your employees

Now that you have your costing structure set up, it's time to define where you want to cost your employee's hours, leave, allowances and any one-off payments. 

1. Assign a home department - in the ‘Employee Details’ screen, there is a ‘Home Costing’ field. This will drive the default settings in the 'Employee costing' screen and cost everything to this department. This is also the department the employee will appear under in any general company reports. 

2. Choose a costing option for hours worked - from the 'Employee costing' screen, there are two ways you can set up costing for the employee:

Define costing now

This lets you set pre-defined costing allocations and is suitable for employees who work fixed hours across different departments or jobs/projects. You can either cost all hours to one place or create a percentage split across multiple areas. Once set up, hours will be costed automatically each pay.

Enter costing at pay time

This lets you assign costs on a pay-by-pay basis and enables the timesheet costing field in the Smartly mobile app. Use this option for any employees working variable hours across more than one department or working on multiple jobs/projects

You can also define which departments/jobs each employee can assign hours to in their mobile app, instead of them being able to see all the departments and jobs that are set up for the company.

How to assign and remove departments/jobs for each employee

1. Go to Employee details and select Employee list. Here you will highlight the employee you would like to assign or remove departments/jobs for.

2. Now click on Employee costing from the left-hand taskbar and click on the Add departments/jobs button at the top.

3. A pop-up screen will appear showing you the departments you can select from. Select the departments or jobs you would like your employee to choose from when they submit their hours using the Smartly mobile app. Click Ok and make sure to click Save at the bottom of the screen anytime you make changes.

4. If you want to remove any departments/jobs that are allocated to the employee, click on the rubbish bin icon next to the department/job and click Save to register any changes.

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Quick tip: anytime you make a change to an employee’s costing, please make sure to click ‘Save’ so the updated departments/jobs will be visible on your employee's mobile app.

3. Define costing type for allowances, leave and one-off payments

The pay component costing section sets up your default cost allocations for allowances, leave and one-off payments. There are three options to choose from:

1. Cost to home department – Costs everything to the employee’s home department.

2. Cost using pre-defined percentages – Splits costs based on the department percentages set above when you opt for 'Define costing now'.

3. Cost based on hours worked – Splits costs based on the amount of time an employee works across different departments. This option is only available when you choose 'Enter costing at pay time'.

Enable costing in leave requests:

Employees can cost leave to a specific department or job when they submit their leave through the Smartly mobile app. To turn this functionality on, refer to the below steps:

1. Go to ‘Employee details’ and select ‘Employee list’. Here you will highlight the employee you would like to enable costing in leave requests for.

2. Now click on Employee costing and scroll down to the Pay component costing section at the bottom. Check the Enable costing in leave requests tick box and hit 'Save. Once done, your staff will be able to cost their leave to a job or department from the list assigned to them.

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Quick tip: line managers can still edit/change the employee's leave allocation via the managers portal.

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Scenario: Apprentice needs to help out another department and currently receives a fuel allowance.

Let’s say you’ve got a plumbing apprentice named Ben that will be helping out with drain laying jobs for the next few weeks. There are no fixed hours, the team just need an extra pair of hands during the busy periods as a team member has gone on leave. You may have Ben set up under 'Define costing now' because currently, he's working fixed hours on two different plumbing projects.

To account for his hours helping out the drain laying team, you have two options:

1. Leave his set up as 'Define costing now' but add the drain laying department and update your percentages, or;

2. Change his set up to 'Enter costing at pay time' and get Ben to allocate his time worked through the app, or you can cost his hours when you're running the pay.

Because the drain laying team only need Ben on an 'as needed' basis though, option two would be a more accurate way to split his hours worked across the two departments.

In this example, Ben also has a work van and is reimbursed for his fuel spend which is costed based on the pre-defined percentages. If you change to 'Enter costing at pay time' this will change to 'Costed based on hours worked'. If you wanted this to continue to be costed to the plumbing department you'd change your allowance costing to 'Cost to home department.' Ben's leave should continue to be costed to his home department.

 

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Costing through the Smartly app and changing costing details in a pay packet

Using ‘Enter costing at pay time’ also enables a 'Costed to' field in the Smartly app as shown below. When your employee adds an entry to a timesheet, they can choose what department or job/project to cost their hours to. You'll just need to make sure the app is enabled and set up correctly.

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How to set your employees up on the Smartly app

1. Go to the Self-service screen in the Company details section.

2. Choose your employee and click on the pencil icon to edit.

3. Create a username and enter an email address where the system can send the employee a link to set up their password.

4. Tick the 'Enable timesheets' checkbox and choose a 'Timesheet approver'. Click 'Save'.

Adding or amending costing details in a pay packet

Hours submitted through the Smartly app or the manager's web portal, once approved, will be added to the pay packet where you can amend or add costed items.

1. In the Pay details screen you'll see a costing table that breaks down what hours have been allocated to what department or job/project. If everything has been approved all you'll need to do is save the pay packet. If you need to reallocate hours or make corrections click Edit costing and a pop-up screen will appear.

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2. A pop-up screen will appear showing the 'Normal pay.' To edit another pay component, select it from the drop-down menu.

3. To reallocate hours, click into the drop-down menu and choose a different department or job/project and edit the hours as necessary. For allowances or one-off payments, edit the amounts and for leave, edit the hours/days/weeks.

You can also create a new line item by clicking on Add costing. Any value changes will still need to add up to the total values (hours or amount) for the pay. If you need to change the total value, go back to the main pay packet first before you edit costing.

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Exporting pay details to Xero

To export your cost structure direct to Xero you'll need to make the following changes. These are all specific to costing. For general Xero set-up and how the data flows through, see our Xero integration guide.

1. Set up Xero tracking categories

Different areas of your business such as departments or locations can be configured in Xero under 'Tracking Categories'. To find out more about how to set these up in Xero, click here.

It’s important that the names are exactly the same in both systems. If there is an error with your data entry, the details will not feed through.

To edit your 'Xero Tracking Category Name' in Smartly go to the Departments/Jobs screen.

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2. Enable 'Cost payments by Department/Job'

Go to GL Accounts and tick the 'Cost Payments by Department/Job' checkbox. This feature enables the 'Export using Xero costing structure' checkbox on the 'Export Pay Details' screen.

 

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3. Export your Xero cost structure

Now go to the Pay details screen and tick the 'Export using Xero costing structure' checkbox in the 'Manual Export' section.

When you select this feature, 'Export Department/Job Descriptions' will be set as the default export option for every pay run.

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Costing report

If you want to see a breakdown of how much money was spent across different departments, download a 'Costing report'.

Go to the 'Report generator', put in the following criteria and choose to display a PDF or download a CSV:

1.   Select report category = Payroll

2.   Report = Costings

3.   Pay groups = Choose your pay group or 'Select all'

4.   Departments = Choose your department and/or job or project

5.   Period end date = Choose relevant pay period OR input a date range.

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