Contractor & construction
Contractor Hourly Rate Calculator
Works a contractor's hourly rate, where billable hours are fewer than worked hours.
Result
Non-billable time is the figure that surprises people. Paying someone for 40 hours and invoicing 28 means every billable hour has to carry the other twelve.
Get a Free Business AuditHow the calculation works
Burdened labour cost plus overhead allocation divided by billable hours, uplifted for profit. The billable hours figure is where the error lives, since travel, loading, supplier runs, estimating and weather all consume paid hours that no customer pays for.
What moves the number
- Realistic billable hours per year.
- Labour burden on top of wages.
- Overhead allocation per billable hour.
- Weather and seasonal downtime in outdoor trades.
Where this one goes wrong
Dividing by a full working year produces a rate that cannot cover the business, because the unbillable share in contracting is large and structural: travel between jobs, collecting materials, and in outdoor trades days lost to weather. Count the hours honestly. Labour burden is the other understatement, since payroll taxes, workers compensation, insurance and paid time add a substantial amount to every wage.
Before you quote
- Divide by realistic billable hours, not working hours.
- Use burdened labour cost, not wages.
- Allow for weather downtime in outdoor trades.
Questions
About this calculator
How many billable hours should I assume?
Considerably fewer than a working year. Travel, loading, supplier runs, estimating and weather all consume paid hours nobody pays for, and in outdoor trades the weather alone removes a meaningful share of the year.
What is labour burden?
Payroll taxes, workers compensation, liability insurance, paid time off and training on top of the wage. It adds a substantial amount per hour, and a rate built on wages alone understates the cost of every hour sold.
Should the rate include overhead?
Yes, allocated per billable hour, plus profit on top. A rate covering only burdened labour recovers the crew's cost and nothing else, which leaves the vehicles, insurance and office funded from nowhere.
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How to use this calculator
- Worker hourly wage ($). Enter your own figure; the page starts at $30.
- Labour burden (%). Taxes, workers' comp, insurance, benefits, paid time off.
- Overhead per billable hour ($). From the overhead calculator.
- Target profit margin (%). Enter your own figure; the page starts at 15%.
- Non-billable time (%). Travel, quoting, restocking, admin.
The result updates as you type, so you can try a figure, see what it does to hourly rate to charge, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Worker hourly wage | $30 |
| Labour burden | 32% |
| Overhead per billable hour | $38 |
| Target profit margin | 15% |
| Non-billable time | 30% |
What comes out
| Result | Value |
|---|---|
| Hourly rate to charge main result | $111.26 |
| True cost per billable hour | $94.57 |
| Burdened wage | $39.60 |
| Day rate (8 hours) | $890.08 |
A 30/hr worker costs $94.57 per billable hour once burden, unbillable time and overhead are carried. Charge $111.26 to hold a 15% margin.
How sensitive the answer is
Holding everything else steady and changing only worker hourly wage, this is what happens to hourly rate to charge. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Worker hourly wage ($) | Hourly rate to charge |
|---|---|
| $15 | $77.98 |
| $22.5 | $94.62 |
| $30 example above | $111.26 |
| $45 | $144.54 |
| $60 | $177.82 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Worker hourly wage ($)
- A money amount, starting at $30.
- Labour burden (%)
- Taxes, workers' comp, insurance, benefits, paid time off.
- Overhead per billable hour ($)
- From the overhead calculator.
- Target profit margin (%)
- A percentage, between 0 and 90, starting at 15%.
- Non-billable time (%)
- Travel, quoting, restocking, admin.
What the results tell you
| Result | What it is |
|---|---|
| Hourly rate to charge | The headline result. A money figure. |
| True cost per billable hour | A money figure. |
| Burdened wage | A money figure. |
| Day rate (8 hours) | A money figure. |
Overhead is where these go wrong
Pricing and margin figures are only as good as the cost you put in. If your cost covers parts and wages but not the van, the insurance, the phone and the unbilled hours, the markup is paying for those before it becomes profit, and the margin you think you are making is not the one you are making.
Keep going
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