.lrc-container {
font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif;
max-width: 800px;
margin: 20px auto;
padding: 20px;
background: #f9f9f9;
border: 1px solid #e0e0e0;
border-radius: 8px;
}
.lrc-header {
text-align: center;
margin-bottom: 30px;
}
.lrc-header h2 {
color: #2c3e50;
margin-bottom: 10px;
}
.lrc-grid {
display: grid;
grid-template-columns: 1fr 1fr;
gap: 20px;
}
@media (max-width: 600px) {
.lrc-grid {
grid-template-columns: 1fr;
}
}
.lrc-input-group {
margin-bottom: 15px;
}
.lrc-input-group label {
display: block;
margin-bottom: 5px;
font-weight: 600;
color: #333;
}
.lrc-input-group input {
width: 100%;
padding: 10px;
border: 1px solid #ccc;
border-radius: 4px;
box-sizing: border-box; /* Important for padding */
}
.lrc-input-group small {
display: block;
margin-top: 4px;
color: #666;
font-size: 0.85em;
}
.lrc-btn {
width: 100%;
padding: 15px;
background-color: #2980b9;
color: white;
border: none;
border-radius: 4px;
font-size: 16px;
font-weight: bold;
cursor: pointer;
transition: background 0.3s;
margin-top: 10px;
}
.lrc-btn:hover {
background-color: #1c5980;
}
.lrc-results {
margin-top: 30px;
background: #fff;
padding: 20px;
border-radius: 4px;
border: 1px solid #ddd;
display: none; /* Hidden by default */
}
.lrc-result-row {
display: flex;
justify-content: space-between;
padding: 10px 0;
border-bottom: 1px solid #eee;
}
.lrc-result-row.final {
border-bottom: none;
background-color: #e8f6f3;
padding: 15px;
margin-top: 10px;
border-radius: 4px;
font-weight: bold;
color: #16a085;
font-size: 1.1em;
}
.lrc-article {
margin-top: 50px;
line-height: 1.6;
color: #333;
}
.lrc-article h2, .lrc-article h3 {
color: #2c3e50;
}
.lrc-article ul {
margin-bottom: 20px;
}
.lrc-article li {
margin-bottom: 10px;
}
How to Calculate Labour Rate: A Comprehensive Guide
Correctly calculating your labour rate is the cornerstone of a profitable service or construction business. Many contractors make the mistake of simply marking up the employee's hourly wage, ignoring the "hidden" costs of employment and overhead. This guide explains how to determine a fully burdened labour rate and set a price that guarantees profit.
1. The Components of a Labour Rate
To arrive at an accurate charge-out rate, you must stack three specific layers of costs before adding your profit margin:
- Base Wage: The actual hourly amount shown on the employee's pay stub.
- Labor Burden: This includes all costs associated with employing a person that are not part of the base wage. Common items include Social Security, Medicare, FUTA/SUTA taxes, Workers' Compensation insurance, health benefits, retirement contributions, and paid time off (vacation/sick days). In many industries, this ranges from 15% to 40% of the base wage.
- General Overhead: These are business expenses that keep your doors open but aren't tied to a specific job. Examples include office rent, utilities, administrative salaries, software subscriptions, and vehicle maintenance. To calculate this for the tool above, divide your total annual overhead expenses by the total estimated billable hours for the year.
2. The Calculation Formulas
The logic used in the calculator above follows a standard accounting flow:
Step 1: Calculate Burden Cost
Burden Cost = Base Wage × (Labor Burden % / 100)
Step 2: Determine Break-Even Cost
Break-Even = Base Wage + Burden Cost + Overhead per Hour
This is the minimum amount you must charge just to cover costs without losing money.
Step 3: Calculate Final Billable Rate
To achieve a true Net Profit Margin, we divide by the inverse of the margin percentage rather than simply adding a markup percentage. This ensures that if you desire a 20% margin, 20% of the final invoice is actually profit.
Billable Rate = Break-Even / (1 - (Profit Margin % / 100))
3. Example Scenario
Let's say you pay a technician $30.00/hour. Your insurance and taxes (Labor Burden) total 25%. You have determined your overhead costs equate to $15.00 for every hour your team works. You want a 20% profit margin.
- Burden Cost: $30.00 × 0.25 = $7.50
- Total Labor Cost: $30.00 + $7.50 = $37.50
- Break-Even Cost: $37.50 + $15.00 = $52.50
- Billable Rate: $52.50 / (1 – 0.20) = $52.50 / 0.80 = $65.63
In this scenario, charging anything less than $65.63 means you are missing your profit target, and charging less than $52.50 means you are losing money on every hour worked.
4. Why Use Margin Instead of Markup?
It is crucial to understand the difference. If you have a cost of $50 and add a 20% markup, you charge $60. However, your profit ($10) is only 16.6% of the total sale ($60). To get a true 20% margin (where 20% of the revenue is profit), you must use the margin formula provided in this calculator, resulting in a charge of $62.50.
function calculateLaborRate() {
// 1. Get Input Values using var
var wageInput = document.getElementById('lrc_baseWage').value;
var burdenInput = document.getElementById('lrc_laborBurden').value;
var overheadInput = document.getElementById('lrc_overhead').value;
var marginInput = document.getElementById('lrc_profitMargin').value;
// 2. Parse values to floats
var wage = parseFloat(wageInput);
var burden = parseFloat(burdenInput);
var overhead = parseFloat(overheadInput);
var margin = parseFloat(marginInput);
// 3. Validation
if (isNaN(wage) || wage < 0) {
alert("Please enter a valid Base Hourly Wage.");
return;
}
if (isNaN(burden) || burden < 0) {
burden = 0; // Default to 0 if empty
}
if (isNaN(overhead) || overhead < 0) {
overhead = 0; // Default to 0 if empty
}
if (isNaN(margin) || margin = 100) {
alert("Please enter a valid Profit Margin (must be less than 100).");
return;
}
// 4. Perform Calculations
// Calculate Burden Amount ($)
var burdenCost = wage * (burden / 100);
// Calculate Total Labor Cost (Wage + Burden)
var totalLaborCost = wage + burdenCost;
// Calculate Break-Even Cost (Labor + Overhead)
var breakEvenCost = totalLaborCost + overhead;
// Calculate Final Billable Rate based on Margin
// Formula: Price = Cost / (1 – Margin%)
var divisor = 1 – (margin / 100);
var billableRate = breakEvenCost / divisor;
// Calculate Profit Amount
var profitAmount = billableRate – breakEvenCost;
// 5. Update DOM elements
document.getElementById('res_baseWage').innerHTML = '$' + wage.toFixed(2);
document.getElementById('res_burdenCost').innerHTML = '$' + burdenCost.toFixed(2);
document.getElementById('res_overhead').innerHTML = '$' + overhead.toFixed(2);
document.getElementById('res_breakEven').innerHTML = '$' + breakEvenCost.toFixed(2);
document.getElementById('res_finalRate').innerHTML = '$' + billableRate.toFixed(2);
document.getElementById('res_profitAmt').innerHTML = '$' + profitAmount.toFixed(2);
// 6. Show results container
document.getElementById('lrc_results').style.display = 'block';
}