Start with real labor cost
Include wages and employer labor burden rather than using the hourly wage alone.
Contractor pricing
Contractor Hourly Rate Calculator
Calculate the hourly rate your contracting business needs to charge after labor cost, labor burden, business overhead, nonbillable time, profit margin, and payment processing fees.
Hourly rate inputs
Enter labor cost, overhead, billable utilization, and your target margin to estimate a sustainable hourly billing rate.
Recommended hourly rate
$115.55 / billable hour
Cost per billable hour
$78.46
Labor cost per billable hour
$57.86
Overhead per billable hour
$20.60
Rate before payment fees
$112.09
Annual billable hours
1,456
Annual revenue target
$168,247.42
Annual pricing breakdown
Base wages$62,400.00
Labor burden$21,840.00
Total labor cost$84,240.00
Allocated overhead$30,000.00
Annual cost requirement$114,240.00
Payment processing fees$5,047.42
Annual gross profit after fees$48,960.00
Effective gross margin
29.1%
Recover business overhead
Spread annual overhead across realistic billable hours so customer work contributes toward operating expenses.
Protect your margin
Add the profit margin and payment-fee allowance needed to reach a sustainable selling rate.
Contractor hourly rate formulas
Annual direct labor cost
Hourly wage × paid hours per year × (1 + labor burden rate)
Annual billable hours
Paid hours per year × billable utilization
Cost per billable hour
(Annual labor cost + allocated annual overhead) ÷ annual billable hours
Target-margin billing rate
Cost per billable hour ÷ (1 − target profit margin)
Rate including payment fees
Target-margin billing rate ÷ (1 − payment processing rate)
Annual revenue target
Final hourly billing rate × annual billable hours
How to use the result
The calculated hourly rate is an internal pricing benchmark. It represents the approximate rate needed for billable labor to recover the costs entered and achieve the selected target margin.
Contractors may charge more or less depending on trade, specialization, project complexity, crew size, travel, equipment, supervision, risk, warranties, geographic market, and demand. Project-based pricing may also produce a different effective hourly rate.
Use realistic billable utilization. Assuming every paid working hour can be billed to customers can significantly understate the rate required to cover nonbillable estimating, administration, travel, training, maintenance, meetings, and downtime.
Pricing disclaimer
Numeravo provides educational planning estimates based on the values entered. Results are not accounting, tax, payroll, legal, employment, insurance, financial, or pricing advice. Actual costs, taxes, insurance rates, employee classifications, market pricing, and business requirements vary. Verify important business decisions with qualified professionals.
Created and maintained by Numeravo Technologies LLC.