It is, by a wide margin, the largest cost category. And yet in most organisations, people costs are managed at the departmental level in HR systems and payroll, completely disconnected from the project budgets and capacity plans where they actually matter.
This disconnect has real consequences.
The Attribution Problem
When a software engineer spends 60% of their time on one project and 40% on another, which project pays their salary? In most companies, the answer is: neither. The salary goes to “Engineering.” Both projects show no people cost in their budget. Both projects appear dramatically under-budget. And no one has a real view of what projects actually cost.
This isn’t just a reporting problem — it’s a decision-making problem. Without visibility into people cost attribution, you cannot:
- Compare the cost efficiency of different projects
- Make informed build-vs-buy decisions
- Understand the true ROI of initiatives
- Set realistic project budgets that include the team’s time
The Tracking Gap
The reason people costs aren’t tracked at the project level is usually that it’s hard. Actual salary data is sensitive. Allocation percentages change frequently. Calculating “the cost of an engineer’s time allocated to Project X this quarter” requires integrating capacity data, HR data, and project data — three systems that rarely talk to each other.
The pragmatic fix is to use a blended rate approach: establish a cost rate per role (e.g., “senior engineer = $X/day fully loaded”) and allocate to projects based on capacity allocation percentages. It’s not precise to the dollar, but it’s directionally accurate — which is what you need for operations decisions.
What You Unlock With People Cost Visibility
When people costs are attributed to projects, a set of powerful analyses become possible:
- True project cost: What did that feature actually cost us to build?
- Cost per team: What does it cost to run the platform team for a quarter?
- Scenario cost modelling: If we hire two senior engineers next quarter, how does that change the project’s financial profile?
- Make vs buy: Is it cheaper to build this in-house or contract it out?
None of these questions can be answered well without people cost attribution. With it, you have the foundation for genuinely data-driven resource and budget decisions.
