Employee Compensation Rate and Effective Rate
The Employee Compensation Rate and Effective Rate settings on an agreement let you measure how profitably your team is delivering hours against a fixed-price or unlimited-hours agreement. These settings affect the Financial Dashboard and two reports: Employee Compensation Base and Invoiced Hours by Member.
They do not change what appears on the customer’s invoice or on individual time records.
Use This Hourly Rate
This setting controls which hourly rate ConnectWise uses when calculating the billable value of time for compensation and effective-rate purposes.
- Actual Hourly Rate — uses the default rate on the member who entered the time.
- This Hourly Rate — overrides the member’s rate with a specific rate you enter. Useful when agreement labor should be valued at a flat rate regardless of who does the work.
Do Not Exceed This Amount
This threshold determines when ConnectWise starts writing down the billable value of time records for reporting purposes. Once the threshold is crossed, ConnectWise adjusts time values proportionally.
- Monthly Billing Amount — adjustments begin when the total value of time entries for the month exceeds the actual recurring invoice amount.
- % of Monthly Billing Amount — adjustments begin when time value exceeds a specified percentage of the monthly invoice amount. For annual agreements, ConnectWise divides the annual amount by 12 to derive the monthly figure.
- This Monthly Amount — adjustments begin when time value exceeds a specific dollar amount you enter.
Note: The adjustment calculation runs nightly, not in real time.
How Write-Downs Are Calculated
ConnectWise adjusts time records proportionally based on each record’s weighted share of the total billable value for the month.
Example setup:
- Compensation setting: Actual Hourly Rate
- Threshold: Monthly Billing Amount = $500
Time records entered:
| Hours | Rate | Value | Running total |
|---|---|---|---|
| 2 hrs | $100/hr | $200 | $200 — under limit, no adjustment |
| 4 hrs | $150/hr | $600 | $800 — over limit, both records adjusted |
Write-down calculation:
Both records are written down so the total equals $500, each adjusted by its weighted share:
- Record 1 weight: $200 / $800 = 25%
- Write-down: (500 × 0.25) − 200 = −$75
- Adjusted value: $125 | Effective hourly rate: $62.50
- Record 2 weight: $600 / $800 = 75%
- Write-down: (500 × 0.75) − 600 = −$225
- Adjusted value: $375 | Effective hourly rate: $93.75
Total Effective Rate for this customer: $83.33 ($500 ÷ 6 hours)
Flatten rates across time records
If you want all time records valued at a uniform hourly rate rather than weighted by each member’s rate, enter a Work Role with an override rate on the agreement. Leave the Work Role field blank so the override applies to all roles.
Unlimited Agreement Proration
For agreements with unlimited hours, ConnectWise prorates the “do not exceed” threshold based on how far into the month you are when the limit is hit.
Example:
- Agreement: unlimited
- Threshold: $1,000/month
- Limit hit: mid-month (day 15 of 30)
ConnectWise applies a prorated limit of $500 (50% of $1,000) to time records entered so far. The limit adjusts upward as the month progresses.
Find the Effective Rate in the Financial Dashboard
- Go to Finance > Financial Dashboard.
- In the Month and Year fields, enter the period you want to review.
- Select Search.
- Select the expand icon next to Agreements.
- Select the agreement you want to review.
- Under the Labor Analysis column, locate the Effective Rate.
Selecting the Effective Rate column header in the dashboard shows a detailed customer list so you can compare rates across agreements.