Contractor Labor Rate Calculator

Calculate the hourly rate your service business actually needs to charge after wages, payroll burden, non-billable time, overhead, and target profit margin.

The base pay before taxes or benefits.
Taxes, benefits, insurance, workers comp. (20-30% is typical)
40 hours × 52 weeks = 2080 hours.
Percent of paid time actually billed to customers.
Rent, software, office staff, insurance, marketing, etc.
The profit margin you want built into the rate.
Enter valid values to update the result.

Required Hourly Rate

$0.00

Estimated required rate based on your inputs to achieve your 20% target margin.

Cost Breakdown

  • Break-Even Rate $0.00
  • Loaded Wage $0.00
  • Labor Cost / Billable Hr $0.00
  • Overhead / Billable Hr $0.00
  • Annual Billable Hours / Tech 0

The Cost of Idle Time

Higher utilization means a greater share of paid technician hours is billable. That spreads labor and overhead across more billable hours, reducing the hourly rate required to reach the same target margin.

Billable Utilization Required Hourly Rate

Methodology

This calculator determines your required rate in three stages:

  1. Labor Cost: We take the base wage and add the labor burden to find the actual cost per hour paid. We then divide that annual cost only by the billable hours to find the true labor cost per billable hour.
  2. Overhead Allocation: We divide total annual overhead by the total billable hours of all technicians combined to find the overhead burden per billable hour.
  3. Margin: We combine labor and overhead to find the break-even rate, then divide by (1 - Margin) to calculate the target required rate.

Limitations

This is an estimation and decision tool. Actual accounting, tax, insurance, labor, and overhead treatment varies significantly by business and jurisdiction. Do not use this as a substitute for professional accounting, legal, or tax advice.