Hourly rate calculator for contractors
Most trades undercharge because they forget overhead and unpaid hours. Plug in your income goal, real billable time, and expenses — get the rate you actually need.
How we calculate your rate
Step 1: Annual overhead = monthly overhead × 12 (or use annual if you entered it). Step 2: Base need = desired annual income + annual overhead. Step 3: If profit margin is set, target revenue = base need ÷ (1 − margin/100); otherwise target revenue = base need. Step 4: Billable hours/year = weeks worked × hours per week. Step 5: Hourly rate = target revenue ÷ billable hours. Daily rate = hourly × (hours per week ÷ 5), assuming a 5-day week.
Example: plumbing business
A plumber wants $90,000 take-home, works 48 weeks, bills 28 hours/week, and spends $2,500/month on van, insurance, and tools. Base need = $90,000 + $30,000 = $120,000. With a 15% profit margin, target revenue = $120,000 ÷ 0.85 ≈ $141,176. Billable hours = 48 × 28 = 1,344. Required rate ≈ $105.04/hr — far above a gut-feel $65 rate that would leave them short after expenses.
Frequently asked questions
Should I use take-home pay or revenue as my income goal?
Use the personal income you want after business expenses but before personal income tax. Overhead (van, insurance, software) is entered separately so it is not double-counted.
What counts as a billable hour?
Only time you can put on a customer's invoice. Admin, quotes that do not win, unpaid travel, and training should be excluded — that is why many contractors need a higher rate than they expect.
How much profit margin should I add?
15–25% is common for healthy service businesses. Zero margin is break-even only — you have no buffer for bad debt, tools, or slow months.
Can I use this rate for fixed-price jobs?
Yes. Estimate hours carefully, multiply by this rate, then add materials and any call-out fee. Our job quote calculator helps you stack those line items.
Is this calculator free? Do I need an account?
Completely free and usable without signing up. Create a free Servicebay account if you want to turn the rate into real quotes and invoices.