How do you calculate a charge-out rate?

Start with what the employee costs you per chargeable hour, add their share of business overheads per chargeable hour to get a break-even rate, then divide by one minus your target margin to add profit. This calculator does it on UK 2026/27 figures.

What's the difference between an employee's cost and their charge-out rate?

The cost is what the employee costs you per chargeable hour — salary, employer NI, pension and on-costs spread over the hours they can actually charge. The charge-out rate is what you bill the customer, and it must sit above the cost to cover overheads and leave a profit.

How do overheads change the charge-out rate?

Overheads — rent, software, insurance, office admin, vehicles — are not in the employee's wage but still have to be paid. Spread this employee's share across their chargeable hours and add it before margin, or the rate only breaks even on labour.

What profit margin should I add to a charge-out rate?

Many UK trades work to roughly a 15 to 25 percent margin on labour, though it depends on your overheads and market. Margin here is on the charge-out price, so a 20 percent margin means profit is 20 percent of the rate. Set it to what your business needs; it is the main dial on the final rate.

What are chargeable hours and why do they matter?

Chargeable hours are the hours you can actually put on a customer's bill after holiday, sick and training days and non-productive time like travel, yard and admin. Fewer chargeable hours means the same cost and overhead are spread thinner, so the rate goes up.

How is an employee's charge-out rate different from a subcontractor's day rate?

A subcontractor quotes their own day rate and carries their own costs, so you pay that rate directly. For an employee you carry the cost — wage, employer NI, pension, on-costs and overhead — so the charge-out rate is what you must bill customers to cover it and make a margin.

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Features

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Trades

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About

FREE CHARGE-OUT RATE CALCULATOR

Employee Charge-Out Rate Calculator for Trades

This charge out rate calculator turns an employed tradesperson's true cost into the hourly rate you bill. Their wage is only the start: add employer NI, pension, on-costs and overhead, spread it over the hours they can actually charge, then add your margin.

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No email address required · Not financial or tax advice

Start from:

Employee cost

Gross annual salary

Employer on-costs / year PPE, tools, van, phone, training

Chargeable time

Contracted days / week

Hours / day

Holiday days / year statutory 28

Sick days / year

Training days / year

Billable % of on-site time rest = travel, yard, admin

Overhead & margin

This employee's overhead share / year rent, software, admin, insurance

Target profit margin %

Charge-out rate to bill

£41.02/ hr

Bill £41.02/hr (£328/day) to cover cost and overhead and make a 20% margin.

Cost floor£27.18

Overhead£5.63

Margin20%

Break-even rate cost + overhead, no profit£32.81/hr

True cost per chargeable hour£27.18

Markup on cost + overhead+25%

Equivalent day rate£328

Chargeable hours / year1,421

Profit / year at full utilisation£11,656

Cost floor uses UK 2026/27 figures (employer NI 15% over £5,000; pension 3% on £6,240–£50,270) and matches the Employee True Cost Calculator. Employment Allowance (£10,500/yr, business-level) not netted off. Estimate only — check current HMRC rates and your own overheads.

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The real cost

An employee costs far more than their wage

The rate you bill has to cover far more than the wage you pay an employed tradesperson.

The wage you pay the employeeHolidays, sick and training days they cannot chargeEmployer National Insurance (15% over £5,000)Auto-enrolment pension (3%)On-costs: PPE, tools, van, phone, trainingA share of business overheads to recoverNon-chargeable travel, yard and admin timeContingency and business profit

These cannot come out of the wage. They have to be recovered through the hours the employee can actually charge — which is what sets the rate.

Where time goes

The hours you can’t put on a bill

A paid day rarely turns into a full day of billable hours.

An employee is paid for the whole day, but only part of it lands on a customer’s bill. The rest goes on:

The hours on the tools are visible. The rest is easy to overlook — but it is exactly why the charge-out rate has to be higher than the wage.

The calculator includes this time so your charge-out rate reflects how the business actually operates, rather than an ideal working week.

Preparing the quoteOrdering or collecting materialsTravel to and from the propertyLoading and unloadingMessages and calls with the customerInvoicing and payment follow-up

Your results

What the calculator shows you

Once you enter the salary, on-costs, hours, overhead and margin, you will see:

Real chargeable hours

The estimated hours each year that can be charged directly to customers.

Cost floor per chargeable hour

What the employee costs you for each hour you can charge — before overhead or profit.

Break-even rate

Cost plus overhead per chargeable hour — the rate at which you make no profit.

Charge-out rate

The hourly rate to bill the customer — cost and overhead covered, with your margin added.

Markup on cost and overhead

How much the charge-out rate adds on top of the break-even rate.

Equivalent day rate

The equivalent rate for a full chargeable day.

Common mistake

Why setting the rate off the wage gives the wrong answer

Taking the wage and dividing by a 40-hour week assumes the employee costs nothing extra and every hour can be sold.

In practice, part of the week is spent on:Looking at new workPreparing quotesDriving between jobsCollecting materialsDealing with suppliersCompleting certificatesSending invoicesAnswering customer questions

If only 28 hours of a 40-hour week can be charged, those hours must recover the cost of the full week — so overhead per chargeable hour is higher than overhead spread across every hour worked.

Worked example

A simple example

How an employee’s cost becomes a charge-out rate once overhead and margin are added.

The £38,623 cost plus £8,000 overhead across 1,421 chargeable hours is a break-even rate of about £32.82 per hour.

Add a 20% margin and the charge-out rate is about £41.02 per hour, or £328 a day. Set the rate off the wage alone and you would bill far too little to cover the real cost.

This is an example only. Your result will depend on your working pattern, costs and required profit.

Employee true cost / year

£38,623

Overhead to recover / year

£8,000

Chargeable hours / year

1,421

Target profit margin

20%

Overheads

What counts as overhead to recover?

Include the annual costs the business must recover through its work.

Van finance or depreciationFuelVehicle insurance, servicing and taxTools and equipmentTool replacement and repairsPublic liability insuranceSoftware and subscriptionsPhone and internetAccountant and bookkeepingTraining and certificationWorkwear and PPEMarketingStorage or premisesWarranty work and bad debt

Do not include material costs charged separately to a specific job — the aim is the cost of providing labour, not the full selling price of every job.

Pricing

Cost, markup and margin are not the same

Your charge-out rate needs to sit above the employee’s cost and overhead. There are two common ways to add profit.

This calculator uses profit margin — the customer rate required for your chosen percentage of the final price to remain as profit after costs are covered.

Markup

Markup adds a percentage to the cost. A £50 cost with a 20% markup becomes £60.

Margin

Margin measures profit as a percentage of the final selling price. A £50 cost at a 20% margin becomes £62.50.

Site conditions

The charge-out rate is your baseline, not every job’s price

The charge-out rate covers cost, overhead and margin. Some jobs still need an allowance for the site itself.

Restricted accessLong walks from parkingOccupied buildingsNight workSecurity proceduresRepeated inductionsShort working windowsHeavily controlled sites

Calculate a site labour uplift →

These conditions reduce the productive work completed in a day. A site uplift allows for the additional labour created by the site itself.

How to use it

Use the result as a pricing baseline

The calculator is not designed to price every job automatically. Use the result as a baseline for:

Hourly-rate workBuilding fixed-price quotesChecking your rate is sustainableSetting labour catalogue itemsComparing estimated vs actual timeReviewing your rate as costs change

A clear charge-out rate makes the rest of your pricing easier to review. You can still adjust individual jobs for scope, difficulty, risk and site conditions.

Watch

Watch: how to price labour on trade jobs

Why a gut-feel hourly rate rarely covers holiday and sick pay, pension, tools, the van and downtime, and how to price the full labour chain around the job instead of just the install.

Stay connected

Keep the price connected to the job

FieldHive lets you save labour fit times, material costs and markups so they can be reused when building quotes. The quote then stays connected to the customer, booking and invoice instead of being rebuilt at each stage.

Enquiry→Quote→Job→Invoice→Payment

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