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Business

Contractor Hourly Rate Calculator

The hourly rate that actually covers pay, overhead and profit.

Your measurementsEvery assumption editable01

What you intend to pay yourself, before profit.

Insurance, vehicle, tools, phone, software, accounting, advertising, rent.

52 less holiday, sickness and slow periods.

Quoting, invoicing, buying materials and driving are not billable. 60–75% is realistic.

Profit is separate from your wage — it is what the business earns.

Your rateCalculated live02

Result

$90.84per hour

1346 billable hours a year covers $110000

Owner pay plus overhead
$110000
Hours worked46 weeks × 45 hours
2070
Billable hours65% of hours worked
1346
Break-even ratecovers pay and overhead, no profit
$81.75/hr
Rate with profit10% margin
$90.84/hr
If every hour were billablethe figure people wrongly work from
$53.14/hr

The billable share is what most rate calculations miss, and it is the difference between a viable rate and an unviable one. Quoting, invoicing, buying materials, driving between jobs and chasing payment are all real hours that no client pays for — so the hours you can bill are typically only two thirds of the hours you work.

Profit is not your wage. Your pay is a cost of the business like any other; profit is what the business earns on top, and it is what funds replacing a van, surviving a slow quarter, or eventually selling the thing. A business that pays its owner and nothing else is a job with extra paperwork.

This is a floor, not a market price. If the resulting rate is far above what your area pays, the answer is usually lower overhead or a higher billable share rather than accepting less — working below your break-even rate simply loses money faster the busier you get.

The number most rate calculations get wrong is billable hours. Quoting, invoicing, buying materials and driving are all real hours nobody pays you for — typically a third of your working week.

Why use this tool?What it does differently03

Why use this tool?

Billable share accounted for

The input that separates a viable rate from an unviable one. Only about two thirds of hours worked can be billed.

Break-even shown separately

What covers pay and overhead with no profit, alongside the rate with profit added.

The naive figure too

What you would charge assuming every hour were billable — usually far too low.

Profit separated from pay

Your wage is a cost of the business. Profit is what the business earns on top.

How this worksThe method04

How this contractor hourly rate calculator works

Owner pay plus annual overhead is what the year must recover. Dividing that by genuinely billable hours gives a break-even rate, and dividing by one minus the profit margin adds the profit on top.

Billable hours are hours worked times the billable percentage. Sixty to seventy-five per cent is realistic for most trades — the rest goes to quoting, invoicing, buying materials, driving between jobs and chasing payment.

Profit is deliberately separate from owner pay. Your wage is a cost like any other; profit is what funds replacing a van, surviving a slow quarter, and eventually selling the business. A business that pays its owner and nothing else is a job with extra paperwork.

How to use itStep by step05

How to use it

  1. Step 1: Set your target pay

    What you intend to earn, before any business profit.

  2. Step 2: Total your overhead

    Insurance, vehicle, tools, phone, software, accounting, advertising, rent.

  3. Step 3: Be honest about billable hours

    Track a fortnight if you are guessing. Most people overestimate this badly.

  4. Step 4: Add profit on top

    Ten per cent is modest. It is the business's earnings, not yours.

Example usageWorked figures06

Example usage

A solo contractor
$75,000 pay and $35,000 overhead over 46 weeks at 45 hours, 65% billable: 1,346 billable hours, an $81.75 break-even, and $90.84 an hour with 10% profit.
The mistake this prevents
Assuming all 2,070 hours were billable gives $53.14 an hour — forty per cent low, and a rate that quietly loses money on every job.
Improving the billable share
Lifting billable hours from 65% to 75% drops the required rate to $78.73. Better admin is worth more than raising prices.
Frequently asked questionsCommon questions07

Frequently asked questions

What hourly rate should I charge?

Enough to cover your pay and overhead across genuinely billable hours, plus profit. A solo contractor wanting $75,000 with $35,000 overhead typically needs $85 to $95 an hour.

What percentage of hours are billable?

Sixty to seventy-five per cent for most trades. Quoting, invoicing, buying materials, driving and chasing payment are all unbilled, and they add up faster than people expect.

Should profit be separate from my wage?

Yes. Your pay is a cost of the business; profit is what the business earns on top, and it funds equipment replacement, slow periods and eventual sale value.

My calculated rate is above the local market — now what?

Usually the answer is lower overhead or a higher billable share, not a lower rate. Working below break-even loses money faster the busier you get.

Does this work for employees too?

The structure does, but you would use the fully burdened cost of an employee — wages plus payroll tax, insurance and benefits — rather than owner pay.

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