Free calculator · Business
True Hourly Rate Calculator
Most tradespeople charge too little because they price against their mate down the road, not their real numbers. Punch in yours below and get the rate you actually need to charge.
The short version
Your true hourly rate is the money your business needs to bring in for every billable hour, not every hour you work. Add up your target wage, your overheads and the profit you want, then divide by the hours you can actually charge for in a year (which is a lot fewer than the hours you put in).
True hourly rate = (Your wage + Overheads + Target profit) ÷ Billable hours a year
Why your rate feels too low
Say you want to take home a £40,000 wage and your overheads run to £12,000 a year. It is tempting to divide that by the hours you work and call it a day. But you do not get paid for every hour. Quoting, travel, chasing invoices, buying materials and the odd cancelled job all eat into the week.
If only about 65% of your hours are actually billable, a normal-looking working year leaves you far fewer chargeable hours than you would think. Spread your wage, overheads and a bit of profit across those hours and the rate you truly need is usually well above what people quote.
Charge the rate the numbers give you, not the rate you think a customer will accept. If the work is good, the right customers pay it.
How to use the result
- Set your floor. This is the least you can charge and still hit your wage and profit. Go below it and you are paying to work.
- Quote per job, not per hour. Use the rate to build quotes, but present customers with a fixed price for the work.
- Revisit it yearly. When overheads or the wage you want change, your rate should change with them.
Questions tradespeople ask
What is a true hourly rate?
It is the amount your business needs to earn per billable hour to cover your wage, your overheads and your target profit. It is almost always higher than the wage-per-hour you have in your head, because only some of your working hours can be charged to customers.
What counts as billable hours?
Billable hours are the hours a paying customer is charged for, the time actually spent on their job. Quoting, travelling, buying materials, admin, invoicing and marketing are real work but not billable, which is why a realistic billable figure is often 60 to 70% of the hours you put in.
What should I include in overheads?
Everything it costs to run the business regardless of any single job: van and fuel, tools and replacements, insurance, phone and software, accountant, workwear, training, and marketing. Do not include materials you buy for specific jobs, those get priced into each quote.
Should profit be separate from my wage?
Yes. Your wage pays you for doing the work. Profit is what the business keeps on top, for slow months, new tools, growth and risk. Rolling them together hides whether the business itself is actually healthy.
Is this rate before or after tax?
Before. The wage figure is your target pay before income tax, and the rate does not include VAT or GST, which you would add on top where it applies. Treat the result as a pricing floor and confirm the tax side with your accountant.
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