Turn payroll cost into a productive-hour cost
Contractors frequently underprice labor because the wage on the pay stub is treated as the cost of an hour sold to the customer. Employer payroll taxes, workers compensation, benefits and allowances raise the cost before the employee performs any billable work. Paid time that cannot be billed raises the productive-hour cost again.
Calculate loaded paid-hour cost first
Start with base wage and add the employer percentages that apply to payroll and workers compensation or similar burden. Add benefits and allowances that are best expressed per paid hour. The result is what a paid hour costs before considering whether the hour can actually be sold.
Adjust for paid non-billable time
Travel between non-chargeable tasks, meetings, training, shop work, warranty callbacks, paid leave and other non-billable time reduce the share of payroll that produces customer revenue. The calculator divides loaded paid-hour cost by the productive share. If only 78% of paid time is realistically billable, each productive hour has to carry some cost from the other 22%.
Add overhead deliberately
Office staff, software, rent, tools, insurance and management are not contained in a wage rate. Enter the overhead allocation your business wants each productive hour to support. This keeps direct labor economics and overhead visible instead of burying everything in one unexplained markup.
Solve for the billable rate from margin
The minimum target bill rate is calculated from the productive-hour cost and the gross margin you enter. Markup and margin are not the same calculation. The tool solves directly for the selling rate that leaves the chosen share of revenue after the modeled hourly cost.
Use the same loaded cost in job costing
Once a reliable productive-hour cost exists, use it consistently in estimates and completed-job analysis. The Job Cost Calculator can combine it with materials, subcontractors, travel and overhead, while the paid Job Profit Calculator keeps repeated job history together.
Frequently asked questions
What belongs in labor burden?
Use employer costs that rise with payroll, such as applicable payroll taxes, workers compensation and benefits.
Why adjust for non-billable time?
Because customer work must economically support paid hours that do not create direct billable revenue.
Is the result a statutory wage calculation?
No. It is a business pricing model using the burden assumptions you enter.