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Labour-rate calculator

A workable labour rate has to recover owner income, business overheads and non-billable time. Dividing a salary target by every working hour usually understates the required rate.

Enter your figures

Results update as you type. Amounts are planning inputs and are not stored by Qwotly.

Calculated result

Use this as a commercial check

Required hourly rate£49.53The net labour rate before VAT.Equivalent 8-hour day rate£396.27An eight-hour equivalent using the calculated rate.Billable hours each year1,288Available hours after the utilisation allowance.

Formula

Hourly rate = (income target + annual overheads) × (1 + profit allowance) ÷ (working weeks × weekly hours × utilisation).

Worked example

With a £40,000 income target, £18,000 overheads, 46 weeks, 40 hours, 70% utilisation and a 10% allowance, the required net labour rate is about £49.53 per billable hour.

Reviewed for UK trade use

Written by the Qwotly product team. Last reviewed 26 July 2026. Educational guidance only, not accounting, tax or legal advice.

A safer way to use the result

  1. 1Use complete annual overheads rather than a rough monthly guess.
  2. 2Estimate billable utilisation from real timesheets where possible.
  3. 3Review the rate after vehicle, insurance, wage or supplier-cost changes.
  4. 4Quote the work and scope, then use the rate as a pricing control rather than a customer-facing promise.

Common mistakes

  • Assuming every hour at work can be invoiced.
  • Leaving quoting, travel, purchasing, callbacks and admin out of non-billable time.
  • Confusing owner drawings with sustainable business profit.
  • Copying another contractor's rate without knowing their costs or capacity.

Questions tradespeople ask

What is billable utilisation?

It is the percentage of available working time that can be charged to customer jobs after travel, quoting, admin, training and other non-billable work.

Is the calculated rate before VAT?

Yes. The result is a net rate. A VAT-registered business may need to add VAT to the customer quote.

Should materials be included in the labour rate?

Direct materials are normally priced separately. The labour rate can still include indirect consumables or overheads if they are not allocated elsewhere.

Continue the quoting workflow

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