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Labor Rate Calculator

This labor rate calculator gives the net hourly billing rate a business needs: enter wage, on-costs, annual overhead and productive hours and read off the rate per working hour.

Example: Gross wage per hour 20 per hour · On-cost surcharge on the wage 70 % · Overhead per year 60,000 per year · Productive employees 3 people · Productive hours per employee per year 1,400 hours · Profit and risk margin 10 % → Billing rate: 53.11 per hour (net). Source: Wikipedia – Zuschlagskalkulation (full cost from direct costs and overheads, markups). Updated: .

per hour
your currency; example value, please enter your own
%
employer contributions, holidays, sick pay; example value, please enter your own
per year
rent, vehicles, office, insurance, admin; example value
people
everyone whose hours are billed (count an owner who works in the business)
hours
billable hours; example value, excluding holiday, sickness, travel and set-up time
%
surcharge on total cost
My ToolboxYour inputs are saved in this browser only.

Result

Billing rate
53.11 per hour (net)
Working
ItemValue per hour
Labour cost incl. on-costs34.00
Productive hours per year (all)4,200
Overhead per productive hour14.29
Total cost per hour48.29
Profit and risk4.83
Billing rate (net)53.11
Share of overhead in the rate26.9 %
Details
  • Calculation: wage × (1 + surcharge) + annual overhead / productive hours per year = cost per hour; then profit and risk on top. All amounts net of sales tax or VAT.
  • Only hours you can bill to the customer count. Holiday, sickness, travel, set-up and office work reduce them and so raise the rate you need.
All presets are example values without an official source. For your own pricing use the figures from your accounts; the rate is a minimum, not a market price.

How it is calculated

With a wage of 20, a 70 % surcharge, 60,000 overhead and three employees with 1,400 productive hours each, the billing rate is 53.11 net per hour. It is the price per working hour at which a business covers all its costs and makes a profit.

How it is calculated

The method is cost-plus or overhead-rate pricing. First the labour cost per hour: gross wage plus a surcharge for employer contributions, holidays and sickness. Then the annual overhead is spread over the productive hours of all employees. Together they are the total cost per hour. A margin for profit and risk goes on top, and the result is the net hourly billing rate.

Practical notes

Frequently asked questions

How do you calculate a labor rate?

Labour cost per hour (with on-costs) plus overhead per productive hour gives total cost, to which you add profit and risk.

What counts as overhead?

Costs that cannot be assigned directly to a job: rent, vehicles, insurance, office, administration, tools and the like.

What are productive hours?

Hours you can bill to the customer. Holiday, sickness, training, travel and office work do not count.

Is the rate net or gross?

Net. Sales tax or VAT is added only on the invoice.

Sources and legal basis

As of: · Editorial policy

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