Contractor hourly rate calculator How to calculate the hourly rate to charge as a contractor
In short
The hourly rate to charge = (yearly wages + employer costs + overhead) ÷ billable hours ÷ (1 − target profit).
Wages are paid on every paid hour, but they are only recovered on billed hours. In the fictional example below, a $32.00 hourly wage leads to a $73.93 hourly rate, 2.3 times the wage.
Billable hourly rate calculator
The starting values come from a fictional example: replace them with yours.
The employee's wage, or the one you pay yourself.
What you pay on top of wages, as a % of wages. The starting figure is fictional, not an official rate: ask your accountant for yours.
Truck, tools, insurance, phone, software, accountant, premises: the share these hours must recover.
Example: 40 hours × 52 weeks = 2,080 hours.
Hours actually billed to clients, without unbilled travel, estimates, maintenance or downtime.
As a % of the billed rate (a margin). Example: 15.
Result
- Hourly rate to charge (before tax)
- $73.93
- Cost per billable hour
- $62.84
- Profit per billable hour
- $11.09
- Profit per year
- $17,744.00
Charge $73.93 an hour to cover a $62.84 cost per billable hour and keep your target profit: a 17.65% markup on cost.
That's 2.3 times the hourly wage.
Where each dollar of the rate goes
- Wages$41.60
- Employer costs$6.24
- Overhead$15.00
- Profit$11.09
- Hourly rate$73.93
The calculation runs in your browser: what you enter is not sent anywhere.
The formula, step by step
With the values of the fictional example:
- Yearly wages = hourly wage × paid hours: $32.00 × 2,080 = $66,560.00.
- Employer costs = yearly wages × 15% = $9,984.00.
- Yearly cost = wages + employer costs + overhead ($24,000.00) = $100,544.00.
- Cost per billable hour = yearly cost ÷ 1,600 billable hours = $62.84.
- Rate to charge = cost per hour ÷ (1 − 15%) = $73.93.
The target profit is a margin: it is calculated on the billed rate, not on the cost. A 15% margin is a 17.65% markup on cost. The markup and margin calculator converts in both directions.
The five figures to gather
The hourly wage
The wage of the employee who does the work. If you work alone, enter the wage you want to pay yourself: it's a cost, not the profit.
Employer costs
The contributions and insurance an employer pays on top of wages, expressed as a % of wages. The percentage depends on the wage and your situation: this page offers no official rate. Revenu Québec's WebRAS tool calculates employer contributions to the Québec Pension Plan, the Québec parental insurance plan and the health services fund; your accountant can complete the list.
Overhead
Everything the business pays without billing it line by line: vehicle, fuel, tools, insurance, phone, software, accountant, advertising, premises. Add it up for a year, then keep the share these hours must carry.
Billable hours
Often the most overestimated figure. From your paid hours, remove unbilled travel, estimate visits, supply runs, tool maintenance, training, bad weather and downtime. The most reliable source: last year's timesheets.
Target profit
What the business keeps once everything is paid: for the unexpected, tomorrow's equipment and the risk you take. The calculator treats it as a margin on the billed rate.
Example: a technician at Plomberie Exemple inc.
Fictional example
Plomberie Exemple inc. pays a technician $32.00 an hour, 2,080 hours a year. It counts 15% in employer costs and $24,000.00 in yearly overhead for this position. These figures are fictional.
Of the 2,080 paid hours, the technician bills 1,600: 480 hours go to travel, estimates and maintenance. Wages alone already come to $41.60 per billed hour.
With employer costs, overhead and a 15% target profit, the rate to charge is $73.93 an hour, before tax. Over the year, the business bills $118,288.00 and keeps $17,744.00 in profit.
| Item | Per year | Per billable hour |
|---|---|---|
| Wages | $66,560.00 | $41.60 |
| Employer costs | $9,984.00 | $6.24 |
| Overhead | $24,000.00 | $15.00 |
| Total cost | $100,544.00 | $62.84 |
| Profit | $17,744.00 | $11.09 |
| Billed rate | $118,288.00 | $73.93 |
Fictional example calculated by this page's calculator. Hourly amounts are rounded to the cent.
Go further
Official sources
This is general information, not tax or legal advice. Check with your accountant.
Frequently asked questions
Add up yearly wages, employer costs and overhead, divide by the year's billable hours, then divide by (1 − target profit). In this page's fictional example: $100,544.00 ÷ 1,600 hours = $62.84 of cost per hour, and $73.93 an hour with a 15% target profit.
Because the rate has to pay, on top of wages, employer costs, overhead, paid hours that aren't billed, and profit. In the fictional example, a $32.00 wage leads to a $73.93 rate, 2.3 times the wage.
Start from your paid hours, then remove everything you don't bill: travel, estimates, supply runs, maintenance, training, downtime. The most reliable figure comes from last year's timesheets. If you bill fewer hours than planned, the cost of each billed hour goes up.
There is no single percentage: it depends on the wage and your situation. This page doesn't suggest one. Ask your accountant, or calculate employer contributions to the QPP, the QPIP and the health services fund with Revenu Québec's WebRAS tool, then add the other costs that apply to you.
Here, a margin: the share of the billed rate that remains as profit. In the fictional example, a 15% margin is a 17.65% markup on cost. To convert one into the other, use the markup and margin calculator.
ORYX Console
Your rate in your quotes, your real hours on iPhone.
The management software from ORYX Gestion Inc., built in Quebec for service businesses:
- Line-by-line quotes, with GST and QST calculated
- Punch in and punch out on iPhone, with a shift timer
- Payroll export in Excel or CSV, regular and overtime hours separated