Labor Rate Calculator
Turn wages, burden, and nonbillable time into a sustainable hourly rate.
Based on your inputs. Review the assumptions below.
Your financial inputs stay in this browser. Results are planning estimates, not guaranteed outcomes or professional advice.
The math, without the mystery.
What this calculator does
Turn wages, burden, and nonbillable time into a sustainable hourly rate. It separates the parts of your estimate so you can examine what changes when a price, cost, or timing assumption changes.
Who should use it
Employers setting an hourly charge-out rate for one worker.
How to use it
Replace the hypothetical inputs with figures from your estimate, contract, or business budget. Enter dollar amounts in USD and percentages as whole percentages: enter 20 for 20%. Results recalculate immediately. Use Reset to return to the example and compare a revised scenario.
How the calculation works
Annual wage = wage × paid hours. Payroll burden = annual wage × burden rate. Annual cost = wage + burden + workers’ compensation + benefits + overhead. Effective hourly cost = annual cost ÷ billable hours. Charge-out rate = effective cost ÷ (1 − target margin).
A worked example
A hypothetical $28 wage for 2,080 paid hours costs $58,240. Adding 15% payroll burden, $3,000 compensation allowance, $6,000 benefits and $12,000 overhead gives $87,976 annually. At 1,600 billable hours and a 20% margin, the hourly rate is $68.73.
Common mistakes
Dividing by all paid hours assumes every paid hour earns revenue. Vacation, training, travel, and downtime reduce billable capacity.