How Much to Charge per Hour as a Contractor
By BRIX Editorial Team · Updated
To set a contractor hourly rate, add a year of burdened field labor and overhead, divide by the hours you can actually bill, then divide by 1 minus your profit margin. A three-tech shop paying $32 an hour with $150,000 of overhead breaks even at $100.98 and should charge about $118.80 an hour.
- Break-even rate (no profit)
- $100.98
- Labor cost per billable hour
- $64.00
- Overhead per billable hour
- $36.98
- Profit per billable hour
- $17.82
- Billable hours per year
- 4,056
- Labor revenue per year at this rate
- $481,864
- Net profit per year
- $72,280
Every billable hour has to bring in $100.98 just to pay your crew and your overhead. Charging $118.80 leaves $17.82 an hour, about $72,280 a year if you sell 4,056 hours. Anything you charge below $100.98 loses money.
Key takeaways
- Hourly rate = (burdened labor + overhead) ÷ billable hours ÷ (1 − profit margin).
- Billable hours, not paid hours, are the denominator. Most techs bill well under 2,080 hours a year.
- Doubling the wage is not a pricing method: here it gives $64, below the $100.98 break-even.
- Raising billable hours is often worth more than raising the rate.
How do you calculate your hourly rate as a contractor?
Your hourly rate has to pay three things for every hour you sell: the burdened cost of the person doing the work, a share of the overhead that keeps the business open, and profit. The trick is dividing by billable hours. A tech is paid for 2,080 hours a year, but drive time, supply runs, estimates, callbacks, training and paid time off are hours nobody pays you for.
Hourly rate = (N × W × H × (1 + B) + O) ÷ (N × H × U) ÷ (1 − P)
- N
- number of people who bill hours
- W
- average hourly wage
- H
- paid hours per person per year
- B
- labor burden as a decimal (payroll taxes, comp, benefits)
- O
- annual overhead
- U
- billable share of paid hours (utilization)
- P
- target net profit margin as a decimal
Step by step: build your rate
- 1
Set the wage, including your own.
Use what you pay your techs. If you work in the field, put in what you'd have to pay someone to replace you. Owner pay is a cost, not the profit.
- 2
Add labor burden.
Employer payroll taxes, workers' comp, health insurance and other benefits often add a quarter to a half on top of wages. Get your number from the labor burden calculator.
- 3
Total your overhead.
Rent, trucks and fuel not charged to jobs, insurance, office wages, software, phones, marketing, accounting. The overhead rate calculator lists what to include.
- 4
Count billable hours honestly.
Paid hours × the share you actually bill. Check your timesheets: if techs are on customer jobs 26 of 40 hours, that's 65%. See billable hours.
- 5
Divide, then add profit.
(Labor + overhead) ÷ billable hours is break-even. Divide that by (1 − profit margin) for the rate to charge.
Hourly rates by shop size
Bigger shops pay for things a solo operator doesn't: an office, a dispatcher, more trucks. Those costs spread over more billable hours, so the rate doesn't always climb with size. These are example inputs, not benchmarks.
| Shop | Billers | Wage | Burden | Billable | Overhead | Break-even | Rate at 15% profit |
|---|---|---|---|---|---|---|---|
| Solo owner-operator, home office, one truck | 1 | $35 | 20% | 60% | $40,000 | $102.05 | $120.06 |
| Owner plus 2 techs, small shop | 3 | $32 | 30% | 65% | $150,000 | $100.98 | $118.80 |
| 8 techs, office manager and dispatcher | 8 | $32 | 35% | 70% | $520,000 | $106.36 | $125.13 |
How much should you charge per hour by trade?
What a trade can charge depends on its wages, its overhead and its market. The table below runs each trade's national median wage through the worked example's other assumptions (3 billers, 30% burden, 65% billable, $150,000 overhead, 15% profit). Your own overhead and billable hours will move these more than the wage does.
| Trade | Median wage (BLS, May 2025) | Break-even rate | Rate at 15% profit |
|---|---|---|---|
| Electrical | $30.38 | $97.74 | $114.99 |
| Plumbing | $30.67 | $98.32 | $115.67 |
| HVAC | $29.33 | $95.64 | $112.52 |
| Roofing | $26.65 | $90.28 | $106.21 |
| Painting | $23.75 | $84.48 | $99.39 |
| Landscaping | $19.27 | $75.52 | $88.85 |
| Cleaning | $17.71 | $72.40 | $85.18 |
This rate covers labor. If you also sell parts and materials at a markup, that margin pays part of your overhead too, so a shop with heavy materials sales can charge a lower labor rate and still hit its target. Check the whole job with the job pricing calculator.
Common hourly rate mistakes
- Charging double or triple the wage. A multiplier ignores your overhead and your billable hours. Two shops with the same wage can need very different rates.
- Dividing by 2,080. Nobody bills every paid hour. Use your real billable share from timesheets.
- Leaving out the owner's wage. If you work in the field for free, your rate only works until you hire someone to replace you.
- Copying the shop down the road. You don't know their costs, and they may be underpricing too.
- Never raising it. Wages, insurance and fuel go up every year. Rerun this each January and when costs jump.
Frequently asked questions
How much should I charge per hour as a contractor?
Enough to cover your burdened labor and overhead for every billable hour, plus profit. Add a year of labor and overhead, divide by billable hours, then divide by 1 minus your profit margin. Use the calculator above with your own numbers.
How much should a one-person contractor charge per hour?
Pay yourself a wage, add your own insurance, taxes and overhead, then divide by the hours you can bill after estimating, driving and paperwork. In the solo example above, billing 60% of 2,080 hours (1,248 hours) with $40,000 of overhead works out to about $120 an hour.
What is a good billable hour percentage for techs?
Measure your own first: hours on customer jobs divided by hours paid. Every point you add spreads overhead across more hours. Better dispatching, fewer callbacks and less time chasing parts and paperwork all raise it. See the technician utilization calculator.
Should my hourly rate include materials?
No. Charge materials separately at your cost plus a markup, or build them into a flat-rate price. The hourly rate covers labor, overhead and profit on the labor portion.
Is it better to charge hourly or by the job?
A set price per job lets the customer approve the price before you start, and it rewards efficient techs. Hourly works for open-ended work with unknown scope. Either way, the hourly rate here is the number your flat-rate prices and bids should be built on; see the flat rate pricing calculator.
How often should I raise my rates?
Recalculate at least once a year and whenever wages, insurance or fuel costs move. Small annual increases are easier for customers to accept than a big jump after years of standing still.
Related
- Labor Burden CalculatorCalculate labor burden with 2026 payroll tax rates, workers' comp, benefits, PTO and unbillable time. See an employee's true cost per billable hour.
- Overhead Rate CalculatorCalculate your overhead rate as a % of revenue, % of direct labor and $ per billable hour. See what to count as overhead and how to price it into jobs.
- Job Pricing Calculator for ContractorsPrice any job for profit: enter labor hours, burdened rate, materials, overhead and target profit to get the price to quote, your margin and markup.
- Flat Rate Pricing CalculatorSet flat-rate prices for service tasks: book hours × selling rate plus marked-up parts. See your margin, and what you earn when a job runs long or short.
- Technician Utilization CalculatorMeasure technician utilization, efficiency and productivity, and see how much revenue a few more job hours per tech per week would add each year.
- What Are Billable Hours?A full-time tech is paid about 2,080 hours a year but bills far fewer. See where the hours go and how to set an hourly rate that covers cost and profit.
- What Is Labor Burden?Labor burden is what an employee costs beyond wages: payroll taxes, workers' comp, benefits. See the formula, 2026 tax rates and a tech's true hourly cost.
- How to Price Contracting Jobs for Profit: The Complete GuideHow to price trades jobs: true labor cost, overhead per billable hour, profit margin, materials markup and flat rates, with worked numbers.
- Maintenance Agreement Pricing CalculatorPrice HVAC, plumbing, pest control and lawn care maintenance agreements from your real costs. Get yearly and monthly prices, margin and tech hours needed.
- Markup and Margin CalculatorConvert markup to margin and margin to markup, or find both from cost and price. Free calculator with a markup-to-margin chart and trade examples.
Sources
- BLS Occupational Outlook Handbook: Electricians (median pay, May 2025) (checked October 12, 2026)
- BLS Occupational Outlook Handbook: Plumbers, pipefitters and steamfitters (checked October 12, 2026)
- BLS Occupational Outlook Handbook: HVAC mechanics and installers (checked October 12, 2026)
- BLS Occupational Outlook Handbook: Roofers (checked October 12, 2026)
- BLS Occupational Outlook Handbook: Painters, construction and maintenance (checked October 12, 2026)
- BLS Occupational Outlook Handbook: Grounds maintenance workers (checked October 12, 2026)
- BLS Occupational Outlook Handbook: Janitors and building cleaners (checked October 12, 2026)