Labor Rate Calculator

By Trade Business Guide Research Desk



Start with the person doing the work

Hourly wage is pay for a work hour. It is not the cost to employ that person or the rate a customer should see. Burden (%) is the added percentage for employer-paid costs you choose to include, such as payroll taxes and benefits. The first output, burdened cost, shows wage multiplied by one plus that percentage. It is useful because it exposes the compensation assumption before office and profit layers are added. The tool does not determine payroll tax obligations for you; enter a burden based on your records or a documented staffing plan.

Overhead (%) is applied to burdened cost in this implementation. This matters when comparing your spreadsheet to the displayed result: an overhead figure expressed as a share of revenue would be a different model. The target Profit (%) is treated as margin on selling price. The calculator divides the burdened-plus-overhead amount by one minus this margin. A percentage below 100 is required for the rate; the burdened cost can still display if later inputs are missing.

How the calculation works

Burdened cost = hourly wage × (1 + burden / 100). Then hourly rate = burdened cost × (1 + overhead / 100) / (1 − profit / 100). The two percentages are not simply added together because overhead is applied after burden, and profit is measured against final revenue. The browser rounds the displayed dollar figures, so use the exact formula when reconciling cents in a quote. The markup and margin tool helps explain why a margin target requires division rather than a simple surcharge.

A single technician hour

Example assumptions — not benchmarks: hourly wage $30, burden 20%, overhead 25%, and target profit margin 20%. Burdened cost is $30 × 1.20 = $36. Applying overhead gives $36 × 1.25 = $45. A 20% margin means that $45 must be 80% of the final rate, so $45 / 0.80 = $56.25 per hour before display rounding. At that rate, $11.25 remains after the modeled $45 cost, and $11.25 / $56.25 = 20%. The inputs are illustrative, not a claim about the wage or burden of any trade.

A different denominator changes the practical quote. A paid employee hour spent loading a truck or traveling may not be an hour the business can sell. This calculator applies percentages to a wage hour; it does not transform paid hours into billable hours. If utilization is important, estimate how many hours a worker will actually bill and then check annual labor revenue against annual employer cost. The employee true cost calculator develops that employer cost from wages, tax percentage, benefits, and insurance.

Putting the rate into an estimate

Multiply the chosen rate by realistically estimated labor hours, then account for materials, disposal, permits, rented equipment, subcontractors, and any other direct job costs. Some contracts show labor separately; others show one fixed price. In either format, compare the final quote with the complete job cost using job pricing. If overtime or different skill levels affect a job, one blended hourly wage may hide the mix. Run separate calculations or build a documented blended wage from the actual schedule.

Overhead allocation deserves special attention. Dividing total overhead by productive labor hours can produce a dollar allocation per hour, but this form accepts a percentage of burdened labor cost. Convert carefully and avoid counting the same expense both in the overhead percentage and as a separate job line. For an annual view of recurring costs, use monthly expense. Update the labor inputs after wage changes, benefit renewals, or sustained shifts in staffing and utilization. A computed rate is a cost-based target; customer demand and competitive positioning remain separate decisions.

Last updated: September 24, 2026