"What should I charge per hour?" is the most important number in a service business — and the one owners most often guess. Your billable rate has to cover the wage you pay, the burden on top of that wage (taxes, insurance, benefits, vehicle, tools), the hours you can't bill, and leave a profit. This calculator does that math for you: enter four numbers and it returns your fully-loaded cost per hour and the rate you'd need to charge to hit your target margin. Everything below the tool explains where each number comes from and how to sanity-check the result.
Calculate your rate
How the math works
The calculator runs a four-step chain. Once you've seen it laid out, you can reproduce it on paper or in a spreadsheet for any role in your shop.
Step 1 — Loaded cost. Start with the annual wage and add the burden on top of it:
loaded cost = wage × (1 + burden%)
A $55,000 wage carrying a 35% burden costs you 55,000 × 1.35 = $74,250 a year. That is the real number your labor has to earn back — not the wage on the pay stub.
Step 2 — Cost per billable hour. Divide the loaded cost by the hours you can actually invoice:
cost per billable hour = loaded cost ÷ billable hours
At 1,400 billable hours, 74,250 ÷ 1,400 = about $53/hour. This is your break-even. Charge exactly this and you make zero profit — you've only covered the technician.
Step 3 — Apply your margin. Here's the step most owners get wrong. To keep a given margin, you divide by one minus the margin — you do not add the margin on top:
rate = cost per billable hour ÷ (1 − target margin%)
At a 25% target, 53 ÷ (1 − 0.25) = 53 ÷ 0.75 = about $71/hour.
Why divide instead of add? Margin is a percentage of the price you charge, not of your cost. If you simply added 25% to a $53 cost you'd get $66.25 — but 25% of $66.25 is $16.56, and your actual profit is only $13.25, or 20% of the sale. Dividing by (1 − margin) is the only way the profit percentage comes out to the number you actually targeted. The gap looks small on one hour and enormous across a year of jobs.
What goes into labor burden
"Burden" is everything you spend to keep a technician working that isn't the base wage. Expressed as a percentage of wage, it commonly lands somewhere in the 25–45% range, but it varies widely by trade, region, and how you equip your crews. Build your own number from your actual books rather than borrowing a rule of thumb.
| Burden component | Notes |
|---|---|
| Payroll taxes | Employer-side Social Security, Medicare, and unemployment; a fairly fixed percentage of wages. |
| Workers' compensation insurance | Rated by trade and claims history; can be a large share for higher-risk work. |
| General liability insurance | Allocated per field employee. |
| Health / retirement benefits | Employer contributions to medical, dental, retirement match, etc. |
| Paid time off | Vacation, holidays, and sick days — you pay the wage but bill nothing. |
| Vehicle | Truck payment or lease, maintenance, registration, and insurance. |
| Fuel | Rises and falls with fuel prices and route density. |
| Tools & equipment | Purchase, replacement, and calibration of what the tech carries. |
| Phone & software | Mobile plan and the per-seat cost of the apps they use in the field. |
| Training & licensing | Certifications, continuing education, and license renewals. |
Some shops fold PTO into the burden percentage; others handle it by lowering billable hours (Step 2) instead. Either works — just don't count it in both places, or you'll double-charge yourself.
Why billable hours (not 2,080) is the number that bites
A full-time year is 2,080 hours (40 × 52). Almost nobody bills all of them. Drive time between calls, restocking the truck, writing estimates, waiting on parts, training, and plain slow days all burn paid hours you can't put on an invoice. The share of paid hours you actually invoice is your utilization, and it's usually lower than owners want to admit — something in the 60–75% range is common, which lands most field techs around 1,300–1,600 billable hours a year.
This single input swings the answer more than any other. Watch the same $74,250 loaded cost at a 25% margin across three utilization assumptions:
| Billable hours/yr | Cost per hour | Rate at 25% margin |
|---|---|---|
| 1,600 | ~$46 | ~$62 |
| 1,400 | ~$53 | ~$71 |
| 1,200 | ~$62 | ~$83 |
Assume 2,080 and you'd calculate a cost of about $36/hour and a rate near $48 — then quietly lose money on every job because the unbillable hours never got recovered. Be honest about billable hours; it's usually the difference between a healthy and a struggling shop. Track it for a few months from your actual invoiced-vs-paid hours rather than guessing.
Margin vs markup
These two words get used interchangeably and mean different things.
- Markup is a percentage of your cost. A $53 cost with a 25% markup is
53 × 1.25 = $66.25. - Margin is a percentage of your price. To earn a 25% margin on that same cost you charge
53 ÷ 0.75 = $70.67.
The calculator uses margin, because margin is what shows up on your profit-and-loss statement. If you think in markup, that's fine — just convert before you compare. A quick reference: a 25% margin equals a 33% markup; a 33% margin equals a 50% markup; a 50% margin equals a 100% markup.
How to use your number
The rate this tool gives you is a floor for planning, not necessarily the price on the customer's invoice. How you present it depends on your pricing model:
- Time and materials. Your billable rate can be close to the posted hourly labor rate — but remember it only holds if your utilization matches the billable hours you entered. If techs bill fewer hours than assumed, the posted rate silently stops covering costs.
- Flat rate. Convert the rate into per-task prices: estimate the labor hours a task takes, multiply by your rate, add materials and any per-job margin, and publish that number. Flat rate hides the hourly figure from the customer and protects you when a job runs long, but it lives or dies on accurate time estimates. See flat-rate vs time-and-materials to choose a model, then fold the rate into a repeatable service estimate.
Either way, treat the calculated rate as the minimum below which a job isn't worth taking, and layer any additional profit target on top of it deliberately rather than by accident.
Regional and seasonal caveats
Costs and defensible rates vary a great deal by trade, region, and season, so treat any single figure as a starting point to test against your own market. Wages, workers' comp rates, fuel, and insurance differ from one metro to the next. Demand is often seasonal — HVAC in a heat wave, plumbing in a freeze — and utilization climbs in busy months and falls in slow ones, which quietly changes your true cost per billable hour across the year. Some shops set one rate off an annual average; others run a higher off-season rate to defend margin when the schedule is thin. Re-run the numbers whenever wages, insurance, or fuel move materially.
Common mistakes
- Dividing by 2,080. The single most expensive error. Use realistic billable hours.
- Confusing margin with markup. Adding a margin percentage on top of cost under-prices you every time.
- Forgetting the owner or unbilled roles. If working owners, dispatchers, or helpers aren't billed directly, their cost has to be recovered somewhere in your rates.
- Leaving burden components out. Vehicle, fuel, tools, phone, and PTO add up fast; a wage-only cost is a fantasy.
- Setting it once and forgetting. Wages, insurance, and fuel drift upward. Revisit at least annually.
FAQ
What's a typical labor burden percentage?
It varies by trade and region, but figures in the 25–45% range are common once you include taxes, insurance, benefits, vehicle, fuel, tools, and PTO. Build yours from your own books rather than borrowing a number — a heavily equipped, truck-based crew carries far more burden than a bench role.
How many billable hours should I assume?
Only the ones you can realistically invoice. For a full-time field technician that's often 1,300–1,600 hours a year after drive time, admin, PTO, and slow days. Track actual invoiced hours against paid hours for a few months and use your own utilization instead of guessing.
Should I charge the same rate for every technician?
Not necessarily. A senior technician on a higher wage, or one carrying more equipment, has a higher loaded cost and can justify a higher rate. Run the calculator once per role or pay band and set rates accordingly.
Does this rate include materials and parts?
No. This is a labor rate only. Materials, parts, and any markup on them are priced separately and added to the job on top of billed labor.
Is my data saved anywhere?
No. The calculator runs entirely in your browser and nothing you enter is sent anywhere. For more pricing questions, see the field service pricing FAQ.
This calculator is for education and planning. It runs entirely in your browser — nothing you enter is sent anywhere. It is not tax or accounting advice.