A 3-person painting company in our example has to bring in $49.25 for every billable hour just to cover wages, payroll costs and overhead, and this free contractor hourly rate calculator works out that number for your business. Enter a year of overhead, your people and the share of their hours that are billable. It uses the same math as the Shop Setup tab in our trade calculators.
The painting example's wages are based on what a painting coach we studied pays; its overhead and billable percentages are the spreadsheet's example settings. Replace them with your own. It runs in your browser and needs no sign-up.
What you enter: overhead, burden and people
Three inputs: a year of overhead, the percentage a person costs on top of their wage, and each person's wage, paid hours and billable share.
| Input | What goes in | Starting value |
|---|---|---|
| Yearly overhead | Rent or storage, insurance, phones, software, licences, small tools, bookkeeping, marketing, uniforms. Monthly bills x 12. | Your numbers |
| Payroll taxes and benefits | % on top of every wage | 12% |
| Workers' comp | % of every wage | 6% (trades differ) |
| People, including you | Hourly wage, paid hours a year (2,080 is 40 x 52), billable % | Owner about 60%, crew about 80% |
Leave truck and machine payments out of overhead. The trade spreadsheets give each vehicle or machine its own cost per running hour, so counting them here would count them twice.
Billable means time on paid work. Estimates, supply runs, driving and paperwork are paid but no customer pays for them directly, and this is the input owners most often get wrong. In a slow week it can be much worse than you think: if you work 40 hours but only 10 of them are on jobs a customer pays for, your billable share that week is 25%, and each of those 10 hours has to carry the cost of all 40.
Why each input matters, and how to find your real numbers, is explained step by step in the true hourly rate guide.
What it tells you: the break-even rate and its two parts
Break-even rate = (total overhead + total real labour cost) / total billable hours, and it is a floor, not a price. For each person the calculator also shows billable hours (paid hours x billable %), real yearly cost (wage x paid hours x (1 + payroll % + workers' comp %)) and real cost per paid hour.
It splits the rate into an overhead part and a labour part, so you can see which one to work on. It does not include materials, equipment or profit; those go on the quote. An optional line adds a safety cushion and profit on top, the way the spreadsheets' Quote tab does.
Worked example: a 3-person painting company at $49.25
$30,700 of overhead plus $194,688 of real labour cost, divided by 4,576 billable hours, gives $49.25 an hour. These are the example numbers from our Painting Pricing Calculator, with burden at 20% (12% payroll + 8% workers' comp).
| Person | Wage | Paid hrs/yr | Billable % | Billable hrs | Real cost/yr | Real cost/hr |
|---|---|---|---|---|---|---|
| Owner / crew leader | $35.00 | 2,080 | 60% | 1,248 | $87,360 | $42.00 |
| A-level painter | $25.00 | 2,080 | 80% | 1,664 | $62,400 | $30.00 |
| Painter / helper | $18.00 | 2,080 | 80% | 1,664 | $44,928 | $21.60 |
| Total | 4,576 | $194,688 |
Break-even: ($30,700 + $194,688) / 4,576 = $225,388 / 4,576 = $49.25 per billable hour, of which $6.71 is overhead and $42.55 is labour. With a 5% cushion and 20% profit: $49.25 x 1.05 x 1.20 = about $62.06, before paint and equipment.
The 20% burden matches a common painting rule of thumb: multiply the wage by 1.2 to cover workers' comp and payroll taxes. On the A-level painter that is $25 x 1.2 = $30 an hour, the real cost per hour in the table. A $25 painter who costs about $32 once everything is counted, and is billed at $64, is the same idea with a slightly higher burden.
Those are single examples, not averages. Use the rates on your own payroll and insurance policy.
Start from a trade example
Eight trade examples are built into our calculators, and their break-even rates run from $44.16 to $69.95 an hour. Pick the closest one, then swap in your own numbers. Overhead is the example's yearly total; burden is payroll plus workers' comp.
| Trade example | Yearly overhead | People (incl. owner) | Burden | Break-even rate |
|---|---|---|---|---|
| House cleaning | $10,200 | 2 | 17% | $44.16 |
| Painting | $30,700 | 3 | 20% | $49.25 |
| Pressure washing | $23,200 | 2 | 17% | $54.31 |
| Fencing | $41,000 | 3 | 20% | $55.27 |
| Lawn care | $26,300 | 2 | 20% | $58.12 |
| Drywall | $33,500 | 3 | 24% | $60.30 |
| Roofing | $83,800 | 4 | 27% | $68.55 |
| Plumbing | $55,300 | 3 | 18% | $69.95 |
Overhead alone doesn't set the order. The fencing example carries $41,000 of overhead, more than drywall's $33,500, yet its rate is lower, because the drywall example pays higher wages and carries a 24% burden.
Three input mistakes and what they do to the rate
Counting every paid hour as billable is the biggest mistake: it makes the painting example's rate $13.13 too low.
| Mistake | What changes | Rate it gives | vs. the real $49.25 |
|---|---|---|---|
| Every paid hour counted as billable | 6,240 hours instead of 4,576 | $36.12 | $13.13 too low |
| Owner bills 80% instead of 60% | 4,992 hours | $45.15 | $4.10 too low |
| Owner left off payroll | Owner wage and hours taken out | $41.47 | Looks cheaper, pays the owner nothing |
A common starter method spreads each monthly cost over every working hour. For example, $500 a month of liability insurance divided by 160 working hours is $3.13 an hour.
That is a fine start, but 160 is every working hour in the month. If a quarter go to driving and quoting, only 120 hours are billable, and the same $500 is $4.17 on each of them.
What to do with your number
Quote at or above it, recheck it yearly, and compare it with what finished jobs actually earned.
- Build the price on top of it. Add materials with markup, equipment, a cushion and profit. Markup vs margin shows how to pick the percentage, and overhead and profit covers what belongs in overhead.
- Recheck it once a year, or when you hire, buy a truck or change insurance.
- Use it in job costing. Multiply each finished job's actual hours by this rate to see what it really left. See job costing.
Each trade's pricing calculator has this Shop Setup tab built in, plus a price list, a quote that uses your rate automatically, a list of the costs owners in that trade forget, and a job log. Pick your trade.