Rajesh_Singh
Kilo Sage
Kilo Sage

In ServiceNow PPM, Rate Models are used to define the cost rates for resources working on projects and demands. Rate Models help calculate the costs associated with resources based on their roles, skills, or other factors. Rate models can be useful when you want to accurately estimate and track costs associated with human resources in your organization.

Creating a new Rate Model:

  1. Navigate to Project Administration > Rate Models in ServiceNow.
  2. Click "New" to create a new rate model.
  3. Provide a Name and Description for the rate model.
  4. Save the new rate model by clicking "Submit."

Relationship between Rate Models and Projects/Demands:

Rate Models are associated with Resource Plans created for Projects or Demands. When a Resource Plan is created, you can select a Rate Model to apply. This Rate Model will be used to calculate the costs associated with the resources in the Resource Plan.

Configuration based on the out-of-box approach:

Out-of-the-box, ServiceNow provides a default Rate Model called "Standard Rates." This model includes predefined rates for different roles, like Project Manager, Developer, or Business Analyst. You can modify these rates or create new ones based on your organization's needs.

Examples:

  1. Different rates for internal and external resources: Suppose your organization works with both internal employees and external contractors. You can create two Rate Models: "Internal Rates" and "External Rates." Each Rate Model can have different cost rates for various roles or skills to reflect the different costs associated with internal and external resources. When creating Resource Plans for Projects or Demands, you can select the appropriate Rate Model based on whether the resources are internal or external.

  2. Different rates based on geographic location: If your organization has resources working in different geographic locations with varying costs, you can create Rate Models for each location (e.g., "US Rates," "UK Rates," "India Rates"). Each Rate Model will have different cost rates for roles or skills based on the location-specific costs. When creating Resource Plans for Projects or Demands, you can select the Rate Model corresponding to the location of the resources.

By using Rate Models, you can better estimate and track resource costs for your projects and demands, leading to more accurate budgeting and financial management in your organization.

 

et's use some numbers to illustrate the examples mentioned above.

Example 1: Different rates for internal and external resources

Suppose you have the following cost rates for internal and external resources:

Internal Rates:

  • Project Manager: $80/hour
  • Developer: $60/hour
  • Business Analyst: $50/hour

External Rates:

  • Project Manager: $120/hour
  • Developer: $90/hour
  • Business Analyst: $70/hour

Now, let's say you have a project that requires 100 hours of work for each role, and you're using a mix of internal and external resources. The Resource Plan and associated costs would look like this:

Internal Resources:

  • Project Manager: 100 hours * $80/hour = $8,000
  • Developer: 100 hours * $60/hour = $6,000
  • Business Analyst: 100 hours * $50/hour = $5,000 Total cost for internal resources: $19,000

External Resources:

  • Project Manager: 100 hours * $120/hour = $12,000
  • Developer: 100 hours * $90/hour = $9,000
  • Business Analyst: 100 hours * $70/hour = $7,000 Total cost for external resources: $28,000

Example 2: Different rates based on geographic location

Suppose you have the following cost rates for different locations:

US Rates:

  • Project Manager: $100/hour
  • Developer: $80/hour
  • Business Analyst: $60/hour

India Rates:

  • Project Manager: $40/hour
  • Developer: $30/hour
  • Business Analyst: $20/hour

Now, let's say you have a project that requires 200 hours of work for each role, and you're using resources from both the US and India. The Resource Plan and associated costs would look like this:

US Resources:

  • Project Manager: 200 hours * $100/hour = $20,000
  • Developer: 200 hours * $80/hour = $16,000
  • Business Analyst: 200 hours * $60/hour = $12,000 Total cost for US resources: $48,000

India Resources:

  • Project Manager: 200 hours * $40/hour = $8,000
  • Developer: 200 hours * $30/hour = $6,000
  • Business Analyst: 200 hours * $20/hour = $4,000 Total cost for India resources: $18,000

By using the appropriate Rate Model for each resource, you can accurately estimate and track the costs for your projects and demands based on the resource type (internal or external) or geographic location.

Comments
PaulaaO
Mega Sage

@Rajesh_Singh  - this article is super useful, but I do have one query: can a rate model be associated with an individual Resource Plan or is applied at the Project or Demand level?

"When a Resource Plan is created, you can select a Rate Model to apply" - I haven't found the field or component that allows this, what am I missing please? Thank you

Dhiren Aghera
Tera Guru

 Hi @Rajesh_Singh great and simple article for understanding the rate model. I have some follow-up questions if you can help me understand -

1. As per my understanding you can assign only one rate model to a Demand/Project. I have the same question as asked by @PaulaaO w.r.t to resource plans and associating a rate model to it. 

2. What is the difference between Rate models an Rate Cards? 

3. We have different rate cards viz. Labor rate cards, task rate cards. What's the use case for using different rate cards vs rate models?

4. Can rate models be used to capture actual cost incurred and how?

Michelle Alexan
Tera Contributor

Maybe you could assist with a question I have?

 

How do I get a rate to apply to an individual if they are selected as a Specific Member.  My rate model calculates if I select User or Group, but if I select group and then just a specific member, the rate is not applied for that member it is applied at the group rate.  All individuals in the group have one rate except for one person.

MichelleAlexan_0-1695326048219.png

 

 

Friedrich Gehri
Tera Expert

Having exactly the same issue as @PaulaaO,
how do I establish the connection between the resource plan and the rating model? I cannot find a related option, when creating a resource plan.
When I do without it, the rate is calculated using the default system rate from the property com.snc.time_card.default_rate, despite having a rate model set up. How do I make it matter?

PaulaaO
Mega Sage

@Friedrich Gehri have a look here Solved: Re: Resource Plan Confirmed/Allocated cost - Page 2 - ServiceNow Community I provided some screen shots. The rate model needs to be added to the project/demand; once you start creating the RPs associated to these, it will pick up the Rate model from this field. Hope this helps

Patti K
Tera Contributor

@Rajesh_Singh Thank you for the detailed explanation!  Best I've seen.  How do you associate a rate model to a resource plan, demand or project?  I do not see a related link or field on any of those records for rate model.  Is it a feature that has to be purchased or is it an OOTB feature thay maybe has to be turned on? Thanks so much!

stevemarkovick
Tera Contributor

I’ve been trying to wrap my head around Rate Models in ServiceNow for a while, and this explanation finally made it click. The example with different cost centers and rate breakdowns really helped. It’s great to see how you can customize rates for internal vs. external work—makes budgeting a lot more transparent. Super helpful post, thanks!

Wendy Harding
Tera Contributor

How can set rates be assigned to contractors without considering their Group or Role? Each contractor has their own unique rate.

 

I require a rate model that can accommodate role-based assignment for staff and individual rates for contractors. Our projects involve a combination of staff and contractors, necessitating a single rate model.

 

To avoid frequent rate model updates upon onboarding new contractors, an efficient method is needed to maintain the model as individual contractor rates may fluctuate over time.

PaulaaO
Mega Sage

@Wendy Harding I think for contractors you'd better use Rate override facility which would overwrite any rate from rate model, default rate etc. This would be alongside the Rate model for the standard roles/groups

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Last update:
‎03-17-2023 06:41 AM
Updated by:
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