Free tool
True cost per billable hour calculator
Your tech’s wage is not what an hour costs you. Add payroll tax, workers comp, benefits, holiday and every hour they are paid but not on a job, and the real number is usually forty to seventy percent higher than the wage. This works it out from your numbers.
Method reviewed by Darren Lim, US CPALicence CPA.74253602Free · No email required · Nothing leaves your browser
Your numbers
True cost per billable hour
$46.43
Every hour you actually bill has to carry $35.36 of wage and burden plus the hours you paid for and did not bill.
Nothing you type here is sent anywhere. The calculation runs in your browser, and your figures stay on this device.
Why the wage is the wrong number
A tech on $28 an hour does not cost $28 an hour. On top of the wage sits the employer half of FICA, federal and state unemployment, workers compensation at whatever rate your trade and claims history earn you, and whatever you contribute to health cover or a retirement plan. That stack is what the industry calls labour burden, and in the home service trades it usually lands somewhere between 25 and 45 percent on top of the wage.
Then there is the part almost nobody prices in. You pay for forty hours. You do not bill forty hours. Drive time between calls, time at the supply house, warranty callbacks, shop time, training, the two hours on a Tuesday when the schedule fell apart — every one of those is paid and none of it is billed. If your techs bill 32 of the 40 hours you pay for, every burdened hour has to carry the cost of the eight that did not.
How this works it out
First it burdens the wage: hours paid per year multiplied by the wage, then payroll tax and workers comp applied as a percentage of that, then benefits added as a flat annual figure. That gives what one employee costs you over a year.
Then it divides by billable hours rather than paid hours. Billable hours are hours paid per week, minus the non-billable hours per week you enter, across the weeks you enter, minus paid time off. The result is the true cost per billable hour — the floor under any rate you charge.
Finally it adds overhead. Your monthly overhead divided across your field techs gives what each one has to carry in rent, insurance, software, the truck, the phone and your office staff. Cost per billable hour plus overhead per billable hour is your break-even billing rate. Bill under it and the job loses money no matter how busy you look.
What to do with the number
Compare it to what you actually charge. Most owners who run this the first time find their break-even rate is close to, or above, their current billing rate on some categories of work — usually maintenance, warranty and anything they quoted flat two years ago and never revisited.
Then check it against your trade’s reality. A rate that works on a full schedule collapses on a slow month, because overhead per billable hour rises when billable hours fall. That is the single most common reason a busy quarter and a profitable quarter turn out not to be the same thing.
Common questions
- What labour burden percentage should I use?
- Payroll taxes are the predictable part: 7.65 percent employer FICA, plus federal and state unemployment, which together usually land between 8 and 11 percent of wages. Workers compensation is the variable one — it is set by your trade classification, your state and your claims history, and in the home service trades it commonly runs anywhere from 4 to 15 percent of payroll. Take both off your actual payroll reports rather than guessing; the numbers are on them.
- How many non-billable hours per week is normal?
- For a service tech running calls, six to twelve hours a week is typical once drive time, the supply house, callbacks and shop time are counted honestly. For install crews it is often lower per head but concentrated into whole days. The only number worth using is your own, and it comes out of your dispatch or field service software.
- Does this tell me what to charge?
- No. It tells you the floor. Your price also has to carry the margin you want, the risk of the specific job, and what your market will bear. What it does is stop you setting a price below the floor by accident, which is the part that is invisible until the year ends.
- Do you store what I type in?
- No. The calculation runs in your browser and nothing is sent anywhere. There is no email box on this page and no results to unlock.
What we do about it
We report billable hours against paid hours every month, and cost every job using the loaded rate rather than the base wage. That turns this from a number you estimated once into a number that updates itself as your payroll, your comp rate and your schedule change.