RHACOVA

Free contractor tool

Contractor Hourly Rate Calculator

An hourly rate has to cover the wage, everything the wage drags with it, your overhead, and a profit. Build it one layer at a time and see where the rate comes from.

Your numbers

Example figures to replace with your own. If you already know your loaded labor rate and overhead per hour from the other calculators, use those.

Payroll taxes, workers' comp, benefits and other employer costs.

Leave at 0 if you recover overhead somewhere else, such as a percentage on cost.

Share of the rate you want left as profit after all of the cost above.

Your result

Billable rate to charge$79.25
Profit in that rate$15.85
Profit margin20.00%
Markup on cost25.00%

How the cost stacks up

Base wage$30.00
Loaded labor costWage plus burden$38.40
Overhead recovery$22.00
Other direct cost$3.00
Cost per productive hourThis is cost. It is not a price.$63.40
Why this number?

cost = loadedLabor + overhead + other; sellingRate = cost / (1 - targetMargin); profit = sellingRate - cost

Inputs

loadedLaborCostPerHour
$38.40
overheadPerHour
$22.00
otherCostPerHour
$3.00
Target margin
20.00%

Results

Cost per productive hour
$63.40
sellingRatePerHour
$79.25
profitPerHour
$15.85
Margin
20.00%
Markup
25.00%

Formula overhead.hourlyRate · engine shared.overhead@1.0.0 · recovery-and-hourly-rate · rounding half-even to 2 decimals.

Save as my default billable rate

Price real work at this rate

Build an estimate with your hours and this rate, and see the job's profit before you send it. Nothing is saved until you confirm it.

Start an estimate

Four numbers people call “my rate”

The wage is what lands on a paycheck. The loaded labor cost is what the employee costs you. The cost per productive hour adds the share of the business that hour carries. Only the fourth number, the selling rate, is what you charge. Mixing them up is how a busy year ends with no money in the account.

How the rate is built

  • Loaded labor cost = wage × (1 + labor burden)
  • Cost per productive hour = loaded labor cost + overhead per hour + other cost
  • Selling rate = cost per productive hour ÷ (1 − target margin)
  • Profit per hour = selling rate − cost per productive hour
  • Markup on cost = profit ÷ cost

Dividing by (1 − margin) is the only way to actually hit a margin. Adding the margin percentage on top of cost gives you a markup instead, and a smaller profit than you intended.

Where the inputs should come from

The burden percentage is the output of the Labor Burden Calculator. The overhead per hour is the output of the Overhead Recovery Calculator. Using guesses for both is what makes an hourly rate feel arbitrary — every layer here should trace back to a real number of yours.

Worked example

A $30/hour employee with 28% burden, $22 of overhead and $3 of other cost in every productive hour, priced for a 20% margin:

  • Loaded labor cost: $38.40
  • Cost per productive hour: $63.40
  • Billable rate: $79.25
  • Profit: $15.85 per hour (20.00% margin, 25.00% markup on cost)

Notice the margin and the markup are different numbers describing the same rate. That gap is not an error — it is the whole reason the two words cannot be used interchangeably.

Common mistakes

  • Charging “wage × 3” because someone said so. It may be far too low, or too high to win work — build the number instead.
  • Forgetting overhead entirely, then wondering why a full schedule does not pay the office rent.
  • Adding the target margin on top of cost. That produces a markup and quietly misses the margin.
  • Using the same rate for a helper and a lead. Burden and productivity differ by person.
  • Discounting the rate to win the job and keeping the same hours. The profit is what shrinks.

Related decisions

Learn the method