HVAC Labor Rate Calculator
Your hourly rate is not your wage plus a bit. It is the whole year's wage cost plus the whole year's overhead, divided by the hours you can actually bill, then divided by one minus the margin you want to keep. The step that changes the answer most is the denominator: you pay for 2080 hours a year and you bill far fewer.
The formula
Every step is arithmetic you can check. There are no assumptions built in and no figures supplied by us.
- Loaded wage = hourly wage x (1 + burden %). Burden is payroll tax, comp, paid time off and benefits.
- Billable hours a year = billable hours a week x 52. This is wrench time, not paid time.
- Wage cost per billable hour = loaded wage x 2080 / billable hours a year.
- Overhead per billable hour = monthly overhead x 12 / billable hours a year.
- Cost per billable hour = the two lines above added together.
- Price per hour = cost / (1 - target margin %). Not cost x (1 + margin).
Run your own numbers
The starting values are placeholders, not recommendations. Nothing is sent anywhere; this runs in your browser.
What the billable ratio does to your rate
This table has no dollars in it on purpose. Each figure is a multiplier on your loaded wage, with overhead left out so that one effect is visible on its own. Find your billable hours on the left, your target margin along the top, and multiply.
| Billable hours per 40 paid |
0% margin | 10% margin | 20% margin | 30% margin | 40% margin |
|---|---|---|---|---|---|
| 20 hrs (50%) | 2.00x | 2.22x | 2.50x | 2.86x | 3.33x |
| 24 hrs (60%) | 1.67x | 1.85x | 2.08x | 2.38x | 2.78x |
| 28 hrs (70%) | 1.43x | 1.59x | 1.79x | 2.04x | 2.38x |
| 30 hrs (75%) | 1.33x | 1.48x | 1.67x | 1.90x | 2.22x |
| 32 hrs (80%) | 1.25x | 1.39x | 1.56x | 1.79x | 2.08x |
| 36 hrs (90%) | 1.11x | 1.23x | 1.39x | 1.59x | 1.85x |
| 40 hrs (100%) | 1.00x | 1.11x | 1.25x | 1.43x | 1.67x |
Read the first column down and the point of the whole page appears: at 40 billable hours the multiplier is 1.00 and at 28 it is already 1.43, before a single dollar of overhead or profit. The hours you cannot bill cost more than the raise you are afraid to give.
Three ways this goes wrong
Dividing by 40
This is the big one. Paid hours are the number on the paycheck and billable hours are the number that carries the cost. Using 40 when you bill 28 understates every hour by about 43 percent, and it does it invisibly, because the arithmetic still looks right.
Adding the margin instead of dividing by it
Cost x 1.30 does not produce a 30 percent margin. It produces 23 percent. The difference sits there on every hour you sell, and it grows with the size of the job. This is common enough that it has its own page: markup vs margin.
Leaving the owner out
An owner who does not pay himself in this calculation is subsidizing the rate with his own labor, and the number that appears at the bottom is not profit. It is his wage, arriving under a different name and without any of the protections that come with a wage.
Then put the number somewhere it gets used
A rate that lives on a piece of paper in the truck gets rounded down under pressure. Save it as a line in your price list and it comes up already filled in on the next quote.
The builder is the paid part of this site: $29 a month for the shop, never per technician, cancel in one click. The price and the terms are on one page. This calculator and the worksheet below are free either way.
Download the blank labor rate worksheet PDF
Related
Once you have an hourly rate, turning it into fixed prices per task is the flat rate pricing guide, and the parts side of the same question is markup vs margin. Putting the result on a document a homeowner can sign is the estimate software, and the blank form it fills in is the HVAC estimate template.
Labor rate questions
How do you calculate an HVAC labor rate?
Load the wage with burden, divide the year's wage cost by the hours you can actually bill rather than the hours you pay for, add overhead spread over those same billable hours, then divide by one minus your target margin. The billable hours step is the one that gets skipped, and skipping it understates your cost by the ratio between paid hours and billable hours.
What is labor burden for an HVAC contractor?
Everything the wage costs you on top of the wage: payroll taxes, workers compensation, liability insurance tied to headcount, paid time off, holidays, training days, and any benefits. It is expressed as a percentage of the wage, and it is not a number anyone can supply for you because comp rates and benefits differ by state and by shop.
How many billable hours a week should I assume?
Count them for a month before you assume anything. Drive time, parts runs, quoting, warranty callbacks, invoicing and the truck are all paid and none of them are billed. Whatever number you land on, it is the denominator for both your wage cost and your overhead, which is why it moves the answer more than the wage does.
Should the owner pay himself a wage in this calculation?
Yes, and at what it would cost to hire someone to do what you do. An owner who leaves himself out of the cost is running a business that looks profitable only because it is not paying one of its technicians. The profit that appears at the end is then not profit, it is your unpaid wage.
Why does this calculator not tell me what other contractors charge?
Because we do not know, and a number we made up would be worse than no number. Rates move by state, by season, by whether you carry a crew, and by what your insurance costs. What we can do is the arithmetic on your own figures, which is what this page is. Nothing you type here is sent anywhere.