Rates and margins / Driveway Desk
Labor cost calculator
Divide paid-hour costs by the billable-hours ratio, then allow for your target margin to find a selling rate.
YOUR ESTIMATE / BILLABLE HOUR
Cost per billable hour: $63.46
Based on your inputs. Before tax.
Send this as a quoteDefaults are a starting point, set your own. Your inputs stay in this browser.
A starting point, set your own rates. National references provide context; these calculations are not city price quotes.
How to calculate labor cost
Start with the wage or owner-pay allowance for one paid hour. Then add payroll and workers compensation allowances as percentages of that wage. Vehicle and other overhead inputs are dollar amounts per paid hour. These denominators matter: entering a monthly truck bill directly into an hourly field would make the result meaningless. Divide a period’s expense by the paid hours in that same period before entering it.
The initial percentages are planning assumptions, not a calculation of taxes or an insurance quote. Employment status, coverage, and location can affect actual costs. The IRS reference below identifies employment-tax categories, but it does not turn the example allowance into a rate that applies to every business. Use payroll records and the policy figures that apply to your situation when replacing the defaults.
For an owner, include an intentional allowance for doing the work rather than treating every hour as free. For a helper, use the costs you actually carry for that worker. Compare them as separate scenarios if they differ. The markup and margin calculator explains the final profit step. A handyman price list then converts the hourly selling rate into task estimates. First get the hourly cost basis right; an attractive-looking rate cannot repair missing expenses in the inputs.
| Billable share | Selling rate per hour |
|---|---|
| 40% | $137.50 |
| 50% | $110.00 |
| 60% | $91.67 |
| 65% | $84.62 |
| 75% | $73.33 |
| 85% | $64.71 |
Labor rate calculator
Billable hours are the hours whose cost your selling rate must recover. If you pay for forty hours but only charge customers for twenty-six, the billable share is sixty-five percent. The calculator divides paid-hour cost by that share. It does not multiply by it. Fewer billable hours mean more cost must be recovered from each hour sold, even when the wage stays the same.
Track the same period for both numbers. Driving, estimates, supply runs, equipment care, and administrative work may consume paid time that is not separately invoiced. Some businesses recover those costs through trip fees or fixed job prices. If that is your approach, avoid allocating the same expense again without accounting for the separate revenue. The model is a planning aid for one consistent allocation method.
The table varies the billable share while keeping the starting cost and margin inputs constant. This shows how utilization alone changes the required selling rate. For a mowing route, use the lawn mowing price calculator to inspect drive and site minutes. For a cleaning visit, the house cleaning price calculator helps compare a flat amount with the hours you expect. A result is only useful when the time definition matches the way you measure your crew’s work.
Contractor hourly rate calculator
The trade buttons load illustrative wage, vehicle, and overhead combinations. They are not BLS wage statistics or a claim about what every cleaner, lawn worker, handyman, or HVAC technician earns. Use them to explore how a different cost structure affects the outcome, then replace each field with your own figures. Payroll allowance, coverage allowance, billable share, and target margin remain visible so a preset cannot silently make those choices for you.
Vehicle expense needs particular care. The IRS mileage reference is a national tax-related benchmark, not a direct instruction to charge that amount to a customer. If you use a mileage-based allocation, estimate the period’s miles and spread the chosen vehicle cost over the corresponding paid hours. Do not also include the same fuel, maintenance, and vehicle costs in other overhead. A consistent method is more useful than a precise-looking answer assembled from overlapping costs.
The pressure washing price calculator provides an area-based selling model that can be checked against this hourly cost. The Driveway Desk overview shows where the quote fits into the working day, and software pricing covers the separate plan decision. Before adopting a rate, compare a completed job’s actual hours and expenses with the estimate. Revise the inputs when evidence changes instead of treating the initial scenario as a permanent industry rule.
How we calculate this
Paid-hour cost = wage × (1 + (payroll allowance + workers comp allowance) / 100) + vehicle + other overhead. Cost per billable hour = paid-hour cost / (billable ratio / 100). Billable rate = cost per billable hour / (1 − target margin / 100). All overhead inputs use paid hours as their denominator.
The IRS employment-tax overview identifies payroll tax categories; the IRS mileage table supplies a national vehicle-cost reference. Neither sets your billable rate. The wages and allowances here are illustrative trade scenarios, not wage survey data or tax calculations. Use your payroll and insurance figures.
Labor cost calculator questions
Why is the billable rate higher than the hourly wage?
The wage is only one component of paid-hour cost. The model also includes payroll and coverage allowances, vehicle expense, and overhead, then spreads that cost across billable hours and applies your margin. A worker can be paid for time that is not separately invoiced, so wage and customer selling rate answer different questions.
How do I calculate the billable-hours ratio?
Divide billable hours by paid hours for the same period and multiply by 100. Twenty-six billable hours out of forty paid hours is 65 percent. Use a consistent definition of billable work across the records. Mixing a busy day’s sales hours with a whole week’s paid hours produces a misleading comparison.
Are the payroll and workers compensation defaults official rates?
No. They are editable planning allowances, not tax calculations or insurance quotes. Replace them with figures that fit your payroll, worker classification, coverage, and jurisdiction. The linked IRS page describes employment-tax categories. Your own records and applicable advice are needed to choose the dollar costs allocated to the work.
How should I enter vehicle overhead per hour?
Choose a period and divide the vehicle expense you intend to allocate by that period’s paid hours. Enter the resulting dollars per paid hour. If you use mileage as an allocation method, do not also include the same vehicle expenses elsewhere in overhead. The linked IRS reference is context, not a customer billing mandate.
Can this calculator estimate the cost of my own labor?
Yes. Enter a deliberate owner-pay allowance for the hours spent doing the work, then include the business costs you intend those hours to recover. Owner and helper scenarios can differ. Leaving owner labor at zero may be useful for a specific cash-cost view, but it will not account for paying yourself for that time.
Are the per-trade labor presets wage benchmarks?
They are illustrative cost scenarios, not measured wage averages. The buttons change wage, vehicle, and overhead assumptions so you can compare cost structures. Check every field afterward, including billable share and margin. Replace the scenario with your actual payroll and expense records before using its result as a reusable customer-facing rate.
Sources and national references
- IRS employment-tax overview, checked 2026-10-12. Payroll tax categories; use your actual employer costs.
- IRS standard mileage rates, checked 2026-10-12. National mileage reference; do not count mileage and the same vehicle expenses twice.
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