Man-Day Rate Calculator
What is a Man-Day Rate?
A Man-Day Rate is the total cost or price of one person's labor for a single working day (typically 8 hours). This metric is critical in project management, consulting, and construction for estimating project budgets and determining contract pricing. It is not just the employee's salary divided by days; it must account for "hidden" costs like taxes, insurance, and company overhead.
How to Calculate Man-Day Rate
To calculate an accurate man-day rate, you must follow a three-step process:
- Identify Total Employment Cost: This includes the base salary plus the "burden" (Social Security, health insurance, 401k matching, and payroll taxes).
- Add Overhead: Factor in the cost of the office space, computers, software licenses, and administrative support allocated to that person.
- Determine Billable Days: Subtract weekends, public holidays, and personal vacation days from the 365 days in a year. Most professionals have between 220 and 240 billable days annually.
The Man-Day Calculation Formula
The math behind our calculator uses the following logic:
Total Annual Cost = Salary + (Salary * Burden%) + Overhead
Break-even Rate = Total Annual Cost / Billable Days
Selling Rate = Break-even Rate / (1 – Profit Margin%)
Example Calculation
Suppose you hire a developer with a salary of $80,000. The employer burden is 25% ($20,000), and their share of office overhead is $10,000 per year. This brings the total cost to $110,000.
If they work 220 billable days per year, your break-even man-day rate is $500. If you want a 20% profit margin, you would bill the client approximately $625 per man-day.
Why Understanding Man-Days Matters
Underestimating the man-day rate is a common reason for project deficits. Many freelancers and small agencies forget to include overhead and non-billable time (like admin work or training). By using a formal man-day rate calculation, you ensure that every project covers its share of company expenses and contributes to the net profit of the business.