Find Your Real Hourly Rate
Labor
Overhead & profit
Markup ↔ margin converter
Track real labor cost on every job
Job costing and time-tracking software shows whether each job actually hit the rate you priced it at.
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How this price is built
- Burdened cost per paid hour = wage × (1 + payroll burden %).
- Labor cost per billable hour = burdened cost ÷ billable share. Unbilled hours still get paid, so billable hours carry them.
- Overhead per billable hour = annual overhead ÷ (workers × paid hours × billable share).
- Break-even rate = labor cost per billable hour + overhead per billable hour.
- Price per billable hour = break-even ÷ (1 − target margin). The matching markup on cost = margin ÷ (1 − margin).
Markup and margin are not the same number. A 25% markup on cost gives a 20% margin on the price. Mixing them up is one of the most common ways contractors underprice.
What Does an Hour of Labor Really Cost?
Far more than the wage. Every hour you pay a field worker also carries employer payroll taxes, workers' compensation, any benefits and paid time off. Then not every paid hour is billable: driving, loading the truck, picking up materials, callbacks and weather all get paid but never invoiced. Spread those costs over the hours you actually bill and the true cost of a billable hour is often well above the wage.
Burdened Labor Rate
Your burdened rate is the wage plus everything the law and your benefits add on top. The percentage depends heavily on your state's payroll taxes and your workers' comp class code, which can be high in trades like roofing. Get your real figure from your payroll provider or accountant and put it in the calculator.
Overhead Per Billable Hour
Overhead is everything you spend to stay in business that isn't tied to a single job: trucks and fuel, insurance, tools, your phone and software, an office, marketing and the owner's time spent on estimates and admin. Divide the year's overhead by the year's billable hours and you know how much every hour has to carry before it earns a dollar of profit.
Break-Even and Profit
Labor cost plus overhead per billable hour is your break-even. Charge less and every hour loses money, no matter how busy you are. Your price adds your target profit on top. Use a margin, not a markup, so the profit percentage is a percentage of what the customer pays.
Markup vs. Margin
Markup is a percentage of cost; margin is a percentage of the selling price. Adding 20% to a $1,000 cost gives a $1,200 price and only a 16.7% margin. The converter above shows both so you can quote with the one your bookkeeping uses.
Use This Rate in Your Job Pricing
The charge per billable hour is the number to plug into the lawn mowing, pressure washing, house cleaning and painting pricing calculators.
Frequently Asked Questions
Start with the wage, add payroll burden (employer taxes, workers' comp, benefits) to get the burdened rate, then divide by the share of paid hours you can actually bill. Add overhead per billable hour to find your break-even rate.
It's the full cost of an hour of paid labor: the wage plus employer payroll taxes, workers' compensation insurance, benefits and paid time off. The percentage varies by state, trade and benefits, so use your own payroll figures.
Markup is profit as a percentage of cost. Margin is profit as a percentage of the selling price. A 25% markup equals a 20% margin, and a 50% markup equals a 33.3% margin.
At least your break-even rate (burdened labor cost per billable hour plus overhead per billable hour), plus your target profit. This calculator works that number out from your own costs.
Costs that keep the business running but aren't tied to one job: vehicles, fuel, insurance, tools and equipment, phone, software, office or shop rent, marketing, licensing and the owner's non-billable admin time.
