Worked example
Use a $25 hourly wage, 2,080 paid hours, 10% payroll burden, 5% workers’ compensation, $6,000 of benefits, 80 PTO hours, 64 holiday hours and 200 other nonproductive hours. Productive hours and annual employer cost determine the true hourly figure.
| Result | Calculated value |
|---|---|
| Annual employment cost | $65,800.00 |
| Productive hours | 1,736 |
| True cost per productive hour | $37.90 |
| Target billable labor rate | $58.31 |
These are fictional defaults for explaining the calculation, not a price or outcome claim.
How the calculation works
Annual employment cost includes base pay, user-entered payroll burden, workers compensation, benefits and other employer costs. Productive hours exclude paid leave and other nonproductive time.
Read the related Serman Tools guide for definitions, limits and another worked example.
Workbook
The free calculator handles one scenario in your browser. Contractor Profit Toolkit keeps the related model in a downloadable workbook.
Frequently asked questions
Why subtract paid nonproductive hours?
Those hours cost money but do not create productive capacity, so the remaining productive hours must carry the annual employment cost.
Can I use annual salary instead of hourly wage?
Yes. Choose salary mode and keep paid and nonproductive hours consistent with the same annual period.
Is this a market-rate recommendation?
No. It calculates from your inputs and does not claim a prevailing local price or guaranteed outcome.
How should overhead be entered?
Use a documented allocation that matches the period and cost pool, and avoid including the same overhead in another input.
What is the difference between markup and margin?
Markup divides profit by cost. Margin divides profit by selling price, so the same percentage does not produce the same price.
Can I use the result as a final quote?
Use it as a planning check, then confirm scope, taxes, terms, technical requirements and every cost that applies to the job.