What should you charge per billable hour?
Your rate isn't the wage plus a bit. It's what a technician and truck cost for each hour you can actually bill, plus your margin. Enter your own numbers, or itemize the payroll taxes, and see every line.
Social Security (6.2%) stops at the 2026 wage base of $184,500; Medicare (1.45%) has no cap. Federal unemployment is 0.6% of the first $7,000 ($42) when you get the full state credit. State unemployment and workers' comp rates vary by state and trade.
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Rate = cost per billable hour ÷ (1 − margin). The same 30% as a markup would give only a 23% margin. Use the rate as your labor cost in flat-rate prices, not the wage.
To calculate a contractor labor rate, add labor burden to the wage, divide by the share of paid hours you can bill, then add truck and overhead per billable hour. That's your cost per billable hour; divide it by (1 − target margin) for the rate. A $32 wage with 30% burden, 50% billable, a $16,000 truck and $75,000 overhead costs $174.20 an hour, so $248.86 at a 30% margin.
How to use the labor rate calculator
Enter the pay
Hourly wage, paid hours a year and the burden: one percentage, or itemized payroll taxes, workers' comp and benefits.
Enter billable time
The share of paid hours billed to customers. Driving, supply runs and callbacks aren't billable.
Add truck, overhead and margin
Yearly truck cost and this technician's share of overhead, then the net margin you want.
What the labor rate calculator does
Cost per billable hour
The number every flat-rate price rests on, built line by line so you can see where it comes from.
Itemized burden
Social Security and Medicare (with the 2026 wage cap), federal and state unemployment, workers' comp, benefits and paid time off.
Margin, not markup
Rate = cost ÷ (1 − margin), so a 30% target really is a 30% margin.
Same method as our price book guide
Matches the worked example in How to Build a Plumbing Price Book, step for step.
Private
Your wages and overhead stay in your browser.
- Method
- (wage + burden) ÷ billable ratio + truck ÷ billable hours + overhead ÷ billable hours
- Rate
- cost per billable hour ÷ (1 − net margin)
- Payroll tax defaults
- 6.2% Social Security to $184,500 (2026) + 1.45% Medicare; FUTA 0.6% of the first $7,000 ($42)
- Varies by state
- State unemployment and workers' comp rates: use your own
- Cost and privacy
- Free, no sign-up; nothing leaves your browser
Labor Rate Calculator FAQ
How do I calculate my labor rate as a contractor?
Start with the wage, add labor burden (payroll taxes, workers' comp, benefits, paid time off), divide by your billable ratio, and add truck and overhead divided by billable hours. That gives your cost per billable hour. Divide it by one minus your target net margin to get the rate.
What is labor burden?
Everything you pay on top of the wage to employ someone: the employer's 7.65% Social Security and Medicare, federal and state unemployment tax, workers' comp, health insurance, retirement contributions and paid time off. Take the total from your payroll records and divide by gross wages.
What billable percentage should I use?
Your own: hours billed to customers divided by hours paid, from last year's timesheets and invoices. Our plumbing price book guide uses 50% in its example, citing industry figures of 40% to 50% of a workday. Drive time, supply-house runs, meetings and callbacks are what pull it down.
Why divide by billable hours instead of paid hours?
Because customers only pay for billable hours, yet you pay for every hour. If half the day is billable, each billable hour has to carry two paid hours of wages and burden.
What does FUTA add per employee?
Federal unemployment tax is 6.0% of the first $7,000 of each employee's wages, but most employers get a 5.4% credit for paying state unemployment tax, leaving 0.6%, or $42 per employee a year. State unemployment tax is separate and varies by state.
Does this give me a flat-rate price?
It gives the hourly cost and rate that flat-rate prices are built from. Multiply the task's hours by the cost per billable hour, add materials, and divide by one minus your margin, or use our flat-rate price calculator for good, better and best options.
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