Your hourly charge, a worker’s hourly cost and profit per labor hour measure different things. Contractors need all three: a cost for time, a realistic billable revenue goal and a check on what completed work earned.
Worked examples use illustrative USD inputs, not national averages or recommended market rates. Service prices exclude applicable sales tax.
Keep five hourly measures separate
- Employee labor cost
- What one worker costs the business for an hour, including wages and relevant payroll costs. A $28 wage plus $7 of employer costs would be a $35 labor input, not a $35 customer rate.
- Owner labor cost
- An allowance for your own time doing the work. Counting it prevents unpaid owner time from appearing as profit. It is separate from the profit you want the business to earn.
- Billable hourly rate
- Revenue charged for a defined billable hour. State whether that means one worker or a whole crew, and whether travel or setup is included.
- Revenue per labor hour
- Job revenue divided by total worker-hours. Two people working two hours use four labor hours.
- Profit per labor hour
- Actual job profit divided by those same worker-hours, after the entered costs and processing fees.
Worked example: a two-person job
A crew charges $560 for a job taking two hours with two people. Total cost, including both workers’ labor and overhead, is $350. Processing at 3% costs $16.80, leaving $193.20 profit.
- Revenue per elapsed crew hour: $560 ÷ 2 = $280.
- Revenue per labor hour: $560 ÷ 4 = $140.
- Profit per labor hour: $193.20 ÷ 4 = $48.30.
Do not call $280 a per-worker rate or mistake $140 for the owner’s hourly take-home pay. The job pricing calculator shows revenue and profit per labor hour alongside the actual margin.
Available working hours are not all billable
Quotes, maintenance, weather gaps, travel and administration reduce the hours available to sell. Suppose your annual plan requires $96,000 in revenue. With 800 billable hours, that implies $120 per billable hour; with 1,000 hours, it implies $96. Those are planning outputs, not market-rate evidence.
Use a consistent hour definition in that plan. If the annual revenue goal covers a crew, the available hours must use the same crew basis. Check the job itself afterward: recurring overhead and income planning do not automatically include every chemical or equipment expense for a particular scope.
When an hourly quote needs extra clarity
Agree on who is working, what activities are billable, the expected duration and how changes will be approved. A fixed quote can be easier for a well-defined scope, while your internal hourly measures still help assess it. Compare the rate formats and their trade-offs before choosing the customer-facing label.