For service businesses
Free labor cost calculator
Use the labor cost calculator to see what an hour of your team’s work really costs, and what to charge for it.
- Free to use
- No account needed
Use it from an AI browser
This page has site tools: actions an AI agent can call directly, with no plugin or API key. The ChatGPT desktop app’s browser can use them where site tools are available, and so can Chrome with WebMCP turned on. The agent works on this page, with the same steps and limits as its buttons, so you can check the result before you use it.
Open doany.ai/tools/labor-cost-calculator and work out my real cost per billable hour for 4 painters paid $26 an hour, each paid 165 hours and billing 120 hours a month, with 22% payroll burden, $3,200 of monthly overhead and a 35% target margin.
Site tools work only while this page is open. They never send messages, invoices or payments for you.
Use the labor cost calculator to understand a billable hour
A wage is only one part of labor cost. This labor cost calculator spreads wages, entered employer costs and benefits across the hours you can bill, then shows overhead and an optional selling rate separately.
Use one planning period throughout
In the labor cost calculator, choose Week, Month or Year under “Planning period”, then enter hours and costs for that period. Changing the period changes the label, not the numbers. Put people with the same pay and hours in one group, and choose “Add a group with different pay or hours” when those differ.
Separate paid time from billable time
In the labor cost calculator, “Paid hours each” is the time your business pays each person for. “Billable hours each” is the part you expect to charge customers for. If someone earns $25 for 40 paid hours but bills only 20 hours, wages alone cost $50 per billable hour before burden, benefits or overhead.
Read the cost, break-even and selling rates separately
In the labor cost calculator, “Employer burden” adds your entered percentage to wages. “Fixed benefits” is a total for that group and period. “Company overhead” is separate. “Your cost per billable hour” covers labor only; “To also cover overhead” adds company overhead, so it is your break-even rate; “What to charge” applies your target margin to that break-even.
Plan for the way your team works
Use realistic billable capacity rather than treating every paid hour as a customer hour. The labor cost calculator uses your assumptions; it does not read payroll or timesheets.
A solo owner doing the work
What to change
Under “Who does the work?”, choose “Working owner / operator” and enter what an hour of your time is worth in “Time value per hour”. Include time spent on the work and time needed to support it. Set billable hours to the portion customers pay for.
Before you use it
Owner compensation belongs in costs before you add business profit.
Employees with different wages or schedules
What to change
Keep a lead worker and a helper in separate worker groups if pay or hours differ. Enter each group's people, wage, paid hours and billable hours. The labor cost calculator combines their costs and billable capacity.
Before you use it
“Fixed benefits” is the group total, not a per-person amount.
A crew that always works together
What to change
In the labor cost calculator, turn on “Also show a rate for the whole crew working together” and enter “Hours the whole crew bills together”. Two people working together for 20 hours provide 40 person-hours and 20 crew-hours.
Before you use it
Each person’s billable hours must match “Hours the whole crew bills together”. Use person-hour results when schedules differ.
Check your assumptions in the labor cost calculator before quoting
- Keep wages, hours, fixed benefits and overhead in the same planning period.
- Allow for paid travel, training, leave and other nonbillable time in your assumptions.
- Exclude wages and benefits already entered above from company overhead.
- Choose “Use this cost in service pricing” to send labor only, then add profit once there. “More options” has other ways to send the cost, with overhead or for the whole crew.
Paid hours are not always billable hours
Travel, setup, training and administration can consume paid time. The labor cost calculator divides loaded payroll by billable person hours to see the hourly labor cost your jobs need to recover.
Person hours and crew hours are different
Two people working together for one hour produce two person hours and one crew hour. A crew rate applies only when the workers operate together. In the labor cost calculator, add overhead once, then choose a profit margin.
Useful answers
How do I calculate loaded labor cost?
For each worker group, multiply “People” by “Paid hours each” and “Wage per hour”. Add your “Employer burden” percentage on those wages and the group’s “Fixed benefits”. The labor cost calculator totals those groups as your labor cost for the period. “Company overhead” stays separate, so you can see the labor cost per billable hour and the break-even with overhead.
Why does a billable hour cost more than the hourly wage?
Paid hours can include time you cannot bill, while burden and benefits can add cost. At $25 per paid hour, 40 paid hours cost $1,000 in wages. If only 20 hours are billable, wages alone require $50 per billable hour. Labor cost divided by billable person-hours gives your labor cost per billable hour.
What should I put in employer burden and fixed benefits?
Enter your own payroll, insurance or benefit percentage on wages as “Employer burden”. “Fixed benefits” is the total for that worker group and planning period, not a per-person figure. Avoid counting the same benefit or paid leave in both places. The labor cost calculator uses your assumptions and does not determine payroll rates or obligations.
How should a self-employed owner calculate the cost of their own time?
In “Who does the work?”, choose “Working owner / operator” and enter what an hour of your time is worth in “Time value per hour”. Use paid and billable hours for the same planning period, including your realistic nonbillable work. Treat that time value as compensation in costs, separate from the optional profit margin. The labor cost calculator does not recommend a wage or salary.
How do I calculate labor cost for a crew with different wages or hours?
Use “Add a group with different pay or hours” for each set of matching wages and hours; the labor cost calculator combines their costs and billable capacity. Use person-hour results when schedules differ. A crew rate appears only when everyone bills the same hours together: turn on “Also show a rate for the whole crew working together” and enter “Hours the whole crew bills together”. Two people together for 20 hours provide 40 person-hours.
Does changing the planning period convert my weekly figures into monthly or annual figures?
No. Week, Month and Year under “Planning period” label the span your numbers cover. Update paid hours, billable hours, fixed benefits and overhead yourself when switching periods. Every cost and hour input must describe the same period; otherwise the rates will compare different spans of time.
What is the difference between labor cost per billable hour, break-even and selling rate?
“Your cost per billable hour” is labor cost divided by billable person-hours. “To also cover overhead” is the break-even rate: labor cost plus company overhead, divided by those hours. “What to charge” is the selling rate: break-even divided by one minus your target margin as a decimal. The labor cost calculator does not automatically add job-specific materials, payment processing or tax to any of these rates.
Can I use this as a labor markup calculator?
It sets the selling rate from a target margin, not a markup. Markup on cost equals margin divided by one minus the margin, so a 30% margin is about a 42.86% markup. To add a markup to a known job cost, use the contractor markup calculator; this labor cost calculator gives you the labor part of that cost.
Which labor rate should I send to service pricing?
Choose “Use this cost in service pricing” under the result to send labor only, per person-hour. To include overhead or use a crew-hour rate, open “More options” and pick another way to send the cost. Every option excludes profit. Service pricing keeps the imported costs and billable hours and does not count imported overhead twice. Set the job’s profit target there instead of importing a selling rate.
Is the labor cost calculator free, and can I download my calculation?
Yes. The labor cost calculator calculates from your inputs without an AI request. “Copy result” needs no account, and “More options” includes “Download calculation” as a JSON file. It does not read payroll or timesheets. Sign in or create an account to reopen a saved private draft; you can keep a downloaded copy without saving it.