Enter the role, hourly billing rate, and number of hours for each team member to calculate the weighted average.
What is a Blended Hourly Rate?
A blended hourly rate is the weighted average rate charged by a professional services firm, agency, or contractor when multiple team members with different billing rates work on a single project. Instead of billing the client separately for the Senior Developer ($150/hr) and the Junior Designer ($60/hr), the agency calculates a single "blended" rate that covers the total cost of the project spread across the total hours.
This metric is crucial for creating simplified flat-rate proposals, estimating project profitability, and streamlining billing processes for clients who prefer a single transparent hourly figure.
How to Calculate Blended Hourly Rate
The formula for calculating a blended rate is not a simple average. You must calculate the weighted average based on the number of hours each person contributes. Here is the formula used by the calculator above:
Blended Rate = (Total Cost of All Hours) ÷ (Total Number of Hours)
Step-by-Step Calculation Example
Imagine a small web design project involving two employees:
- Senior Strategist: Charges $200/hr and works 5 hours.
- Junior Developer: Charges $100/hr and works 20 hours.
If you just averaged the rates ($200 + $100) / 2, you would get $150/hr. This is incorrect because the Junior Developer worked significantly more hours.
Correct Calculation:
- Calculate Cost for Strategist: $200 × 5 = $1,000
- Calculate Cost for Developer: $100 × 20 = $2,000
- Total Project Cost: $1,000 + $2,000 = $3,000
- Total Hours Worked: 5 + 20 = 25 Hours
- Blended Rate: $3,000 ÷ 25 = $120/hr
Why Use a Blended Rate?
Agencies and consultancies use blended rates for several strategic reasons:
- Simplicity for Clients: Clients often find a single hourly rate easier to understand and budget for than a complex breakdown of varying seniority levels.
- Flexibility in Staffing: If you quote a blended rate, you have the internal flexibility to assign a senior or junior resource to a task without constantly renegotiating the contract, provided the work quality is maintained.
- Profit Margin Protection: By understanding your blended cost versus your blended billable rate, you can ensure that projects remain profitable even when the mix of senior and junior staff changes.
When NOT to Use a Blended Rate
While useful, blended rates can be risky if the project scope creeps. If a project ends up requiring significantly more time from your most expensive senior staff than originally anticipated, your blended rate might not cover their costs, leading to margin erosion. Always track actual hours against the estimated blend to ensure profitability.