Calculate the complete cost of one billable technician hour
Account for base wages, employer-paid labor costs, nonbillable paid time, business overhead, and target margin. Replace the example inputs with your payroll, time-tracking, insurance, and accounting records. For a trade-neutral version, use the contractor hourly rate calculator.
Start with wages for every paid hour, then add employer-paid costs such as payroll taxes, workers' compensation, unemployment insurance, and benefits. Divide that monthly labor total by realistic billable hours. Allocate business overhead separately, then apply margin to the complete cost.
Labor cost per billable hour = (monthly wages + employer labor burden) / billable hours
Selling rate = (labor cost per billable hour + overhead per billable hour) / (1 - target margin)
An hourly wage is one input. It is not the business's hourly cost or the customer-facing rate.
These are editable examples, not industry benchmarks. Replace every value with your records.
Base wage before employer-paid costs.
Use payroll hours, including paid nonbillable work prepared consistently with your burden input.
Payroll taxes, workers' compensation, insurance, retirement, and other employer-paid costs. Include each cost once; do not add paid leave here if it is already captured in paid payroll hours.
Use completed customer-work records, not scheduled capacity.
Operating costs not already counted in wages or labor burden.
Profit as a percentage of the final selling rate.
Count each cost once. Use the same accounting treatment for paid hours and labor burden, and update the inputs when staffing or seasonality changes.
Replace every example input with your records before using this rate in an estimate.
The calculator opens with hypothetical inputs: a $30 wage, 173 paid hours, 15% labor burden, 120 billable hours, $6,000 overhead, and 20% margin. These numbers demonstrate the calculation; they are not an HVAC benchmark.
| Step | Calculation | Example |
|---|---|---|
| Monthly wages | $30 x 173 | $5,190.00 |
| Employer labor burden | $5,190 x 15% | $778.50 |
| Monthly labor cost | $5,190 + $778.50 | $5,968.50 |
| Labor cost per billable hour | $5,968.50 / 120 | $49.74 |
| Overhead per billable hour | $6,000 / 120 | $50.00 |
| Fully loaded cost | $49.74 + $50.00 | $99.74 |
| Example selling rate | $99.74 / (1 - 20%) | $124.67 |
The example wage is $30, but the business must recover about $99.74 for each billable hour before profit. That difference comes from employer-paid costs, paid time that cannot be billed, and overhead.
Labor burden contains costs directly connected to employing the technician: employer payroll taxes, unemployment insurance, workers' compensation, employer-paid insurance or retirement contributions, and other employee-specific costs. Use payroll and insurance records, and count each cost once.
For 2026, IRS Publication 15 lists employer Social Security at 6.2% up to the wage-base limit and employer Medicare at 1.45%. Those federal taxes are only part of labor burden; 7.65% is not a complete burden rate.
The Bureau of Labor Statistics Employer Costs for Employee Compensation program explains that employer compensation includes wages and benefits such as paid leave, insurance, retirement, and legally required benefits. Its national private-industry data provides context, not an HVAC-specific burden percentage.
Overhead covers operating costs not already counted in wages or labor burden. Examples include vehicles, facilities, office payroll, general liability insurance, software, phones, marketing, licensing, tools, accounting, and owner administrative time. If workers' compensation is in labor burden, do not include the same premium again in overhead.
After setting an hourly rate, use the HVAC profit margin calculator to check a complete job with its labor, materials, and selling price.
Paid hours come from payroll. Billable hours come from completed job and time records. Training, meetings, callbacks, shop work, vehicle loading, and some travel can be paid without producing a separately billable customer hour. Use representative months and update the calculator when staffing or operations change.
Contractor time tracking software can help separate paid time from time assigned to customer work. The job cost calculator then checks the entered rate against a specific job's hours and other costs.
Margin is profit as a percentage of the final selling price. Markup is the percentage added to cost. A 20% margin requires dividing cost by 0.80. Multiplying cost by 1.20 produces a 16.7% margin.
For the complete estimate-to-invoice workflow, review HVAC contractor software, or return to the contractor calculator library.
Sources checked September 2, 2026: IRS Publication 15 (2026) and the U.S. Bureau of Labor Statistics Employer Costs for Employee Compensation program. Federal rates and benchmark data can change. This calculator is an educational estimate, not tax, accounting, or legal advice.
Multiply the technician hourly wage by all paid hours, add employer-paid labor costs, and divide the monthly total by realistic billable hours. This produces labor cost per billable hour. Add overhead per billable hour before applying profit margin to calculate the customer-facing selling rate.
Use the costs shown in the company payroll, insurance, and benefits records. Common categories include employer payroll taxes, unemployment insurance, workers compensation, health or retirement contributions, training, and employee-specific equipment or allowances. Count each cost once and use actual records when available.
The customer rate must cover the wage, employer-paid labor costs, paid time that is not billable, business overhead, and profit. The technician wage represents only one part of the cost of delivering an hour of service.
Use completed time records from representative months. Compare paid technician hours with hours assigned to billable customer work. Revisit the input when staffing, routing, callbacks, or seasonality changes.
Yes, if the company expects labor revenue to recover some or all operating overhead. Allocate monthly overhead across realistic billable hours using a consistent method, and avoid counting any employee cost in both labor burden and overhead.
Compare estimated labor with completed job records and keep pricing decisions connected to the work.
$19.99/month • 14-day free trial • Cancel anytime