Calculate Hourly Rate as a Tradesperson — Step-by-Step

Many tradespeople set their hourly rates based on what their competitors charge. However, this is a dangerous trap: if your fixed costs are higher or you work fewer hours, you might end up making zero profit despite a full schedule.

Step 1: Calculate Your Billable Hours

A calendar year has 365 days, but you cannot bill all of them. Let's calculate the real labor hours:

• Total Days: 365 days
• Minus Weekends: -104 days
• Minus Public Holidays: -10 days (average)
• Minus Vacation Days: -30 days
• Minus Sick Leave: -10 days (average buffer)
• Available Work Days: 211 days (approx. 1,688 hours at 8h/day)

Crucial: Only about 70% to 80% of these hours are directly billable to customers. The rest is spent on admin, driving, and quotes. Let's calculate with 1,200 billable hours per year.

Step 2: Sum Up Your Fixed Business Costs

List all annual business expenses:

• Vehicle lease, fuel, and insurance: $6,000
• Tools and workshop rent: $8,000
• Software licenses (accounting, ERP, CRM): $1,500
• Accounting and tax advisor: $2,500
• Insurances (liability, etc.): $2,000
• Marketing and website: $1,000
• Total Fixed Costs: $21,000 / year

Step 3: Desired Salary & Taxes

As an owner or self-employed person, you need a salary that covers your personal life and health insurance. Let's assume you need a gross salary of $60,000 per year.

The Formula

Step 4: The Final Calculation

Let's run the numbers:

• Base Cost: $21,000 (Fixed Costs) + $60,000 (Salary) = $81,000
• Divide by 1,200 billable hours = $67.50 / hour
• Add 10% profit margin buffer = $74.25 / hour (net)

Conclusion

Knowing your minimum hourly rate protects your business. Regularly review your calculation at the end of the year to adjust for inflation and changing fixed costs.