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Free tools / Labor rate

What an hour of labor really costs.

Start with a wage. Add the burden, spread your overhead over the hours you can actually bill, and add the profit you want. Out comes the rate to charge.

One person, one year

Payroll taxes, workers' comp, benefits and paid time off, as a percent of the wage.

40 hours × 52 weeks is 2,080.

Drive time, shop time and slow days aren't billable.

Truck, tools, insurance, software, rent, office pay.

Everyone who bills time.

As a margin: a share of the rate you charge.

These are example numbers, not averages for your trade. Replace every one with yours. Nothing you type leaves this page.

Bill $97.19 an hour. Break-even is $77.75. True cost of an hour worked is $39.00.

Bill this per hour

$97.19an hour

Break-even rate
$77.75
Profit each hour
$19.44
True cost of an hour worked
$39.00
Hours you can bill a year
1,352

Why the rate is higher than the wage. You pay for every hour, but only 65% of them can be billed. Each billed hour has to carry the ones that weren't.

How it's worked out

  1. True cost of an hour worked

    wage × (1 + burden) = $30.00 × 1.3 = $39.00

  2. Hours you can bill

    paid hours × share you can bill = 2,080 × 0.65 = 1,352

  3. Labor cost per billed hour

    true cost × paid hours ÷ billable hours = $60.00

  4. Overhead per billed hour

    (overhead × 12 ÷ people) ÷ billable hours = ($4,000 × 12 ÷ 2) ÷ 1,352 = $17.75

  5. Break-even rate

    labor + overhead = $60.00 + $17.75 = $77.75

  6. Rate to charge

    break-even ÷ (1 − margin) = $77.75 ÷ (1 − 0.2) = $97.19

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