Direct answer
True hourly cost uses employer cost and productive capacity, not wage alone. Recover overhead through realistic billable hours before applying margin.
| Figure | Source |
|---|---|
| Numbers shown on this page | Fictional worked example; not a market benchmark |
| Formula and definitions | Serman Tools method stated on this page |
| Your quote or operating result | Your verified business inputs |
Calculate the hourly rate
Use one electrician or one blended role at a time. Replace the example with your verified costs.
Start with productive labor cost, not wage alone
An electrician paid $34 per hour does not necessarily cost the company $34 per productive hour. Employer payroll taxes, workers' compensation, paid leave, benefits and paid nonbillable time can raise the cost materially. The calculator applies one burden percentage to the wage, so use a burden rate built from the costs that actually apply to the role.
Do not add the same cost twice. If vehicle, office payroll or software is already included in the labor-burden percentage, exclude it from monthly overhead. Keep a short note beside each assumption so the model remains auditable.
Recover overhead through realistic billable hours
Calendar hours are not billable hours. Training, estimating, callbacks, shop time, meetings, travel gaps and unfilled schedule time can reduce the hours that carry revenue. Dividing monthly overhead by an optimistic 160 hours understates the rate when only 120 hours are normally invoiced.
Break-even hourly rate = burdened labor cost + monthly allocated overhead ÷ monthly billable hours. Target rate = break-even rate ÷ (1 − target margin).
Fictional worked example
At a $34 wage and 32% burden, direct labor costs $44.88 per hour. If $3,600 of monthly overhead must be recovered through 120 billable hours, overhead adds $30 per hour. Break-even is therefore $74.88 per billable hour. A 30% target margin produces a planning rate of $106.97, not $97.34: multiplying break-even by 1.30 would apply a 30% markup rather than a 30% margin.
What this rate does not include
The result is an hourly economic planning rate, not a complete quote or a market recommendation. Add materials, permits, inspection fees, travel, access equipment, warranty reserve and job-specific risk separately. Local licensing, code, safety and employment requirements remain outside this calculator.
Frequently asked questions
Is wage the same as true labor cost?
No. True labor cost can also include employer payroll costs, paid nonproductive time, benefits and allocated overhead.
Why use billable hours instead of paid hours?
Overhead must be recovered through hours customers can actually be billed for. Update the assumption from scheduling and invoicing history.
Does this calculate a service-call price?
No. It calculates an hourly planning rate. A service call may also need travel, materials, permits, equipment and a minimum dispatch charge.
NEXT STEP
Price the whole electrical job.
Use the free trade-specific job calculator for labor mix, materials, permits and warranty reserve. The workbook adds quote logging and six home-service models.