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Contractor Hourly Rate Calculator

Estimate a billable hourly rate from annual compensation, labor burden, overhead, billable capacity, and your target operating margin.

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Your inputs

01 / Enter

These are editable examples, not recommended rates. Enter your own numbers.

Calculator inputs

Owner/worker pay for the year. Keep profit separate.

Employer costs beyond compensation. Exclude anything in overhead.

Business overhead not already in compensation or burden.

Hours you can actually invoice, excluding unpaid sales, admin, and downtime.

Profit as a percentage of revenue, after the entered costs.

Your result

02 / Understand

Loading the example calculation…

Show the math

Estimates use unrounded numbers. Displayed amounts round to cents.

What this means

Paid or worked hours are not necessarily billable hours. This rate spreads your annual cost over only the hours you expect to invoice. Owner compensation pays for work; operating profit is the remainder after that compensation and other entered costs.

Worked example

Editable example: $60,000 compensation + $6,000 burden + $24,000 overhead = $90,000 annual cost. At 20% margin, revenue is $112,500 and profit is $22,500. With 1,500 billable hours, the rate is $75/hour. At 1,000 hours, the same cost and margin require $112.50/hour.

How the math works

Annual cost = compensation + employer burden + overhead. Target revenue = annual cost ÷ (1 − target margin / 100). Target hourly rate = revenue ÷ annual billable hours. Operating profit = revenue − annual cost.

About this estimate

All costs cover the same year and workforce. Count each expense once. Do not add loaded compensation and its burden again. No market rates, taxes, or employer percentages are assumed. Billable hours must be positive to calculate a rate; margin must be below 100%. Defaults are illustrative, not recommended rates.

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Formula v1.0.0 · Reviewed · Tool ID: contractor-hourly-rate