Free calculator
Contractor Hourly Rate Calculator
Work out the hourly rate a contracting business needs once the truck, insurance, tools and the hours nobody pays for (quoting, driving to supply houses, callbacks) are counted. Test the rate you charge now and turn your rate into a job quote. Free, no sign-up.
- Revenue you need$0
- Hours you work per year0
- At the rate you are checking, you keep$0
- Per hour you actually work$0
- Job labor at your rate card$0
- Costs with markup$0
- Job quote$0
The rate you need if you bill more of your week
- 50% of your hours billed$0
- 60% of your hours billed$0
- 70% of your hours billed$0
- 80% of your hours billed$0
How it works
A contractor's rate has to pay for more than the hours on the job. Estimates, driving to the supply house, invoicing and callbacks all take time no customer pays for, and the truck, insurance and tools cost money whether you work that week or not.
This calculator grosses your take-home up for the tax share you set aside, adds a year of business expenses, and spreads that revenue over the hours a customer actually pays for: your working hours times your billable share. That is your minimum hourly rate; the rate card rounds it up to the next $5.
To test a rate, it multiplies the rate by your billable hours, takes out expenses and your tax set-aside on any profit, and divides what is left by every hour you work. A job quote is its billable hours at your rate-card rate, plus materials with your markup.
A worked example
A contractor who wants $65,000 a year take-home, sets aside 25% for tax and spends $14,000 a year on the truck, insurance and tools needs $100,667 of revenue. At 48 weeks of 50 hours with 55% billable, that is 1,320 billable hours out of 2,400 worked, so the minimum rate is $76.26 (rate card $80). Charging $45 an hour brings in $59,400 and leaves $34,050 after expenses and tax: $14.19 for every hour worked, $30,950 short of the goal. A 16-hour job at $80 is $1,280 of labor; $600 of materials with a 20% markup adds $720, for a $2,000 quote. Billing 80% of your hours instead of 55% would bring the minimum rate down to $52.43.
Keep it, change it, quote with it
The Hourly Rate Quick Calculator is this calculator as a one-tab Excel and Google Sheets workbook, with the same quick quote, the billable-share table, a rate card and a Start Here guide. $2.99, instant download.
Questions
How do I calculate my hourly rate as a contractor?
Start from the take-home you want, add the tax you set aside and a year of business expenses, then divide by the hours customers actually pay for. With the example numbers that is $100,667 over 1,320 billable hours, or $76.26 an hour.
Why is my rate so much higher than what I made as an employee?
An employer paid for the truck, the insurance, the tools and the hours spent driving and quoting. On your own you pay for all of that from your rate, and only the billable share of your week earns it.
What billable share should a contractor use?
Track a few weeks of your own time and divide the hours a customer paid for by all hours worked, quoting and driving included. The example's 55% is a starting point, not a benchmark. The table under the results shows the rate you would need at 50%, 60%, 70% and 80% billed.
Should I mark up materials?
That is your call. Many contractors add a markup to cover the time spent buying, hauling and returning materials; set it to 0 to pass materials through at cost. The example uses 20%.
What tax set-aside rate should I use?
Ask your tax preparer. A set-aside rate is a savings habit you choose, not a tax calculation, and this calculator does not tell you which rate to use.
Is this tax or financial advice?
No. It is a planning estimate based on the numbers you enter.