Labor cost calculator: the true cost of a billable hour
A technician’s wage is only part of what they cost. This labor cost calculator adds payroll tax, workers’ comp, health insurance, paid time off, training, vehicle and tools, then divides by the hours you can actually bill.
The wage
What the technician is paid for every hour on the clock: the floor of the block, and the only part of the cost the pay stub shows.
What you pay on top of the wage
Tax, insurance, time off and the cost of putting a tech in a truck with tools. Each is a layer on the wage, to scale.
The employer’s FICA share is 7.65%.
Your insurer’s rate; it varies by trade and state.
Per month.
Paid at the wage, 8 hours a day.
Per month.
Per month.
Per month.
The hours you can bill
The hours on customer jobs you can charge for. Driving between jobs, admin, training and waiting are still paid, and the billable hours have to cover them.
Share of paid hours spent on jobs you can charge for.
Labor cost, answered
What is a labor burden rate?
It is what an employee costs you above their base wage, as a percentage of that wage: payroll tax, workers’ comp, health insurance, paid time off, training and — in this calculator — their vehicle and tools. With the calculator’s starting values, a $25-an-hour technician on 40 hours a week earns $52,000 a year and costs $75,738 in total, a burden rate of 45.7%.
What is the difference between billable and non-billable hours?
Billable hours are the time spent on customer jobs that you can charge for. Non-billable hours are everything else you still pay for: driving between jobs, admin, training, meetings and waiting. The calculator divides the year’s total cost by billable hours only, because those are the hours that have to pay for all the others.
Why does true labor cost matter for pricing?
Because pricing from the wage alone loses money. With the starting values, 65% of 2,080 hours is billable and 80 hours go to paid time off, leaving 1,272 billable hours. $75,738 ÷ 1,272 is $59.54 per billable hour — 2.4 times the $25 wage. Your rate has to clear that before there is any profit.
Cost per billable hour: $59.54
Cost per billable hour
$59.54
2.4× the $25.00 wage. Price above this to make a profit.
- Layer
- Per hour paid
- Tools
- –
- Vehicle
- –
- Training
- –
- Paid time off
- –
- Health insurance
- –
- Workers’ comp
- –
- Payroll tax
- –
- Wage
- $25.00
- Area ÷ width
- = height
- The year’s wage
- $52,000
- Hours paid
- 2,080 h
- An hour paid
- $25.00
On the pay stub: $25.00 an hour for 2,080 hours, $52,000 a year.
From labor cost to a price
The cost of a billable hour is where a price starts. From here: what a job costs, the rate to charge, and the margin that is left.
- 1
Labor cost calculator
You’re hereWhat a technician costs for each hour you can bill.
- 2
Job cost calculator
Use the cost per billable hour to price a crew job with materials and overhead.
- 3
Contractor hourly rate calculator
The rate you need to charge to cover salary, overhead and profit.
- 4
Profit margin calculator
Net margin once labor, materials and overhead are paid.
Know what each hour costs
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