Practical tools for measured work
Contractor Hourly & Billable Rate Calculator
Convert annual compensation, burden, overhead and realistic billable utilization into break-even and target-margin hourly rates.
The salary or wage cost the rate must support.
Insurance, vehicle, shop, software, accounting, marketing, and similar costs.
Share of paid time customers can actually be billed for.
Margin on revenue after compensation and overhead.
This is an annual capacity model. Revisit it with actual billable hours and overhead from your books instead of treating utilization as a one-time guess.
How it works
Work backward from the year. A sustainable hourly rate must recover compensation, payroll burden, and business overhead during the smaller pool of hours customers can actually be billed.
Calculation. Billable hours = work weeks × paid hours per week × utilization. Annual cost = compensation × (1 + burden %) + overhead. Break-even rate = annual cost ÷ billable hours. The recommended rate divides break-even by (1 − target profit margin).
Assumption. Compensation is a cost of doing the work; profit is the return left after that compensation and all entered overhead. This keeps owner pay and business profit from being accidentally treated as the same thing.
Current-input example
The result above uses these exact values. This snapshot is included when the page is printed so the output can be checked against the original measurements.
- Annual owner/employee compensation
- 70000 $/yr
- Payroll burden and benefits
- 18 %
- Annual business overhead
- 42000 $/yr
- Working weeks per year
- 48 weeks
- Paid hours per week
- 40 hr
- Billable utilization
- 65 %
- Target profit margin
- 15 %
Primary result: Recommended billable rate: 117.46 $/hr.
Before using the result
- Measure from the datum or reference edge described by this tool, and do not mix inside, outside and centerline dimensions.
- Keep inputs in the displayed units and preserve more precision than the final cutting or purchasing tolerance requires.
- When the result is close to a limit, verify it with a test piece, field measurement, manufacturer drawing or qualified project professional.
Limitations
The result is only as reliable as the annual overhead and utilization inputs. It does not include materials, subcontractors, sales tax, contingency, or job-specific risk; add those when building an individual bid.
Frequently asked questions
What counts as non-billable time?
Estimating, travel you do not charge for, purchasing, callbacks, training, bookkeeping, marketing, and gaps in the schedule all reduce utilization.
Why not divide annual cost by 2,080 hours?
Because few contractors invoice every paid hour. Dividing by all paid hours makes billable hours carry too little overhead and understates the rate whenever utilization is below 100%.
Is owner compensation profit?
No. Compensation pays for labor performed. Profit is the return earned after that labor and the business's other costs have been paid.
Related tools
Loaded Labor Rate
Build the fully-loaded hourly cost and bill rate behind a bare wage, with a visual cost-stack breakdown.
Minimum Service Call
Price a minimum service visit from travel, admin and onsite loaded labor, vehicle cost, consumables and target margin.
Roofing Piece Rate
Calculate roofing labor and material cost per square from roof area, piece rate, crew capacity and waste factor.
Crew Cost Per Day
Blend a mixed-role crew's daily labor cost and compare it against expected piece-rate revenue for the day.