How to calculate a contractor labor rate that pays for the whole employee.
Hourly wage is the beginning of the math, not the answer.
01
Start with productive hours
A field employee does not bill every paid hour. Holidays, PTO, rain days, training, travel, meetings, and gaps between jobs reduce utilization. Divide annual fully loaded cost by the hours you can responsibly sell.
02
Load the wage
Payroll taxes, workers compensation, benefits, vehicles, tools, and other field costs belong in the labor rate. If they are left out, overhead and net profit have to carry them later.
03
Add company overhead and target margin
Allocate company overhead across the field team, then price the rate for the margin your business requires. Keep this rate current as wages, insurance, and utilization shift.
