Trade Labor Rate Calculator
Calculate the fully-loaded billable hourly labor rate for tradespeople, accounting for base wages, benefits, overhead, and desired profit margin.
Formula
Step 1 – Labor Cost Rate:
Labor Cost Rate = Base Wage × (1 + Benefits% / 100)
Step 2 – Overhead Rate per Worker:
Overhead Rate = Annual Overhead ÷ (Number of Workers × Billable Hours/Year)
Step 3 – Total Cost Rate:
Cost Rate = Labor Cost Rate + Overhead Rate
Step 4 – Billable Rate (with profit margin):
Billable Rate = Cost Rate ÷ (1 − Profit Margin% / 100)
The profit margin formula ensures the margin is calculated on revenue, not cost. For example, a 20% margin means profit is 20% of the final billable rate, not 20% added on top of cost.
Assumptions & References
- Billable hours: Typically 1,600–1,900 hours/year after accounting for vacation, holidays, sick time, and non-billable administrative time (industry standard is ~1,800 hrs).
- Benefits & payroll taxes: Commonly 20–35% of base wage; includes FICA (7.65%), workers' comp, health insurance, unemployment insurance, and retirement contributions.
- Overhead: Includes vehicle costs, tools, insurance, office expenses, licensing, and marketing — allocated equally across workers covered.
- Profit margin: Calculated as a percentage of revenue (not a markup on cost). A 20% margin ≠ a 20% markup. Markup = Margin% ÷ (1 − Margin%).
- References: U.S. Bureau of Labor Statistics Employer Cost for Employee Compensation (ECEC); Contractor pricing guides (e.g., RSMeans, Craftsman Book Company).