A $25 tech doesn't cost $25 an hour.
Wages are the start. Payroll taxes, workers' comp, benefits, paid days off and the hours nobody can bill all land on top. Put in your numbers and see the fully burdened cost of an hour you can actually charge for.
Use the cost per billable hour as the floor under your labor rate. Redline remembers the rate you charge and prices the quotes it drafts with it.
Try Redline freeHow the math works
Start with wages for the year: hourly wage times paid hours. Add your employer payroll taxes and workers' comp as percentages of those wages, then add benefits and other yearly costs per employee. That's the total yearly cost. The labor burden is how much that total runs over plain wages, as a percentage.
Cost per paid hour divides the yearly cost by every hour you pay for. Cost per billable hour is the number that matters for pricing: it divides the same cost by only the hours that end up on an invoice. Paid time off comes out first, because you pay those hours but nobody works them. Then the billable share takes out drive time, shop time, supply runs and callbacks.
The tax and insurance percentages are yours to fill in. They depend on your state, your payroll setup, the wage base and your comp class codes, so use the figures from your payroll provider, your insurance policy or your accountant. This page is arithmetic, not tax advice.
Worked example
A $25 an hour employee, 2,080 paid hours, example rates of 10% payroll taxes and 8% workers' comp, $4,000 in benefits and 80 hours of paid time off. Yearly cost is $65,360, a 25.7% burden, or $31.42 per paid hour. What changes is the billable share:
| Billable share | Billable hours | Cost per billable hour |
|---|---|---|
| 60% | 1,200 | $54.47 |
| 75% | 1,500 | $43.57 |
| 90% | 1,800 | $36.31 |
Tax, comp and benefit figures are examples, not rates for any state or trade. Put in your own.
What to watch for
- Billable share moves the answer more than anything else on this page. Look at a few weeks of real invoices against hours paid before you trust your guess.
- Overtime isn't here. If your crew regularly runs past 40 hours, the extra pay raises the cost of those hours.
- Truck, fuel, tools and the phone you hand them can go in the yearly costs line if they belong to that one employee. Shared costs belong in overhead.
- Training time and the first weeks of a new hire are paid and mostly unbillable. A new hire's billable share starts low.
- Your own time works differently. For an owner's rate, use the hourly rate calculator.
Questions contractors ask
What's the difference between this and the hourly rate calculator?
This one is what an employee costs you. The hourly rate calculator is what you, the owner, need to charge to cover your pay and overhead. Use this number as the labor cost when you build a job price, then add overhead and profit on top.
Is the cost per billable hour what I should charge?
No, it's the floor. Charging that much only gets the employee paid for. Overhead and profit still go on top. The overhead rate calculator gives you overhead per billable hour to add.
How does Redline use my labor rate?
Tell the chat your labor rate ("we bill $95 an hour") and memory saves it, so Redline can price the quotes and invoices it drafts with it. On Team ($129 a month, 3 seats), techs get the tech app with their day's jobs, and they never see prices. Redline doesn't run payroll or track hours worked, so the inputs here come from your payroll records.
Related
Keep reading
- Hourly rate calculatorTurn pay, overhead and billable hours into the rate you should charge.
- Overhead rate calculatorOverhead as a share of revenue, per billable hour and as a markup on job cost.
- Job profit calculatorSee what a job really makes after materials, labor and overhead.
- Crew dispatch and tech appA board for every tech's day and a simple app for the crew. Team plan and up.