Labour Hour Rate Calculator

Work out labour hour rate instantly with clear inputs, formula shown and shareable results.

About Labour Hour Rate Calculator

The charge-out rate must recover the technician's fully loaded cost plus allocated overhead across billable hours only — typically 1,400-1,600 of the 2,080 paid hours. Dividing by paid hours rather than billable hours is the classic error that leaves a service business unprofitable.

Formulas

Cost per billable hour

Cost per hour = (Technician cost + Allocated overhead) / Billable hours

Charge-out rate

Rate = Cost per billable hour / (1 - Target margin %)

Worked example

With the default values below, Labour Hour Rate Calculator returns Charge-out rate per hour of $1,903.45. Change any input above and every figure here is recalculated in your browser.

Inputs used

Annual fully loaded technician cost: 1,450,000
Annual overhead allocated per technician: 620,000
Billable hours per year: 1,450
Target margin on the charge-out rate: 25

Results

Charge-out rate per hour: $1,903.45
Cost per billable hour: $1,427.59
Margin per hour: $475.86
Annual revenue per technician at this rate: $2,760,000.00

Step by step

1Values used
2Cost per billable hour
3Charge-out rate
4Charge-out rate per hour= 1,903.45
5Cost per billable hour= 1,427.59
6Margin per hour= 475.86
7Annual revenue per technician at this rate= 2,760,000.00

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation or tax into account.
Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Why are billable hours so much lower than paid hours?

Because of leave, training, travel between jobs, quoting, van maintenance and administration. Seventy percent billable is a good result.

Should overhead be allocated per technician?

Yes for pricing purposes. Total overhead divided by the number of technicians is crude but far better than ignoring it.