Labor cost calculator

Find out what one hour of work really costs your business. Enter pay and hours from the same month (or year), then click Calculate. Payroll taxes and billable share can wait — you do not need them to start.

Inputs

Use pay and hours from one month (or one year), then click Calculate.

Also add payroll taxes, billable share, or mark-up

The button only suggests a typical amount. You can change it or type the figure from your own payroll.

Result

The cost of one hour will show up here. Enter pay and hours, then click Calculate.

A rate from mark-up: price from mark-up. Margin on price: margin. Recovering outlay: payback period.

How it works

Formula

First add pay, payroll taxes, and any other costs, then divide by hours. If you enter a billable percent, you divide by that smaller hour count. Formula: k = (W + S + O) / Heff. Client rate = k × (1 + mark-up/100).

Example: $10,000 ÷ 126 h (75% of 168 h)
Pay + taxes10,000
Billable hours126 h
Cost / h79.37

Employer labor cost per hour is pay plus payroll taxes plus any other costs for that person, divided by hours. With an empty billable-share field, you divide by every hour you pay for. For example, 8000 and 160 hours with no taxes is 50.00 per hour. The same 8000 with 2000 in taxes is 62.50 per hour.

Billable share changes the denominator. With 10,000 in costs and 168 paid hours, cost from the full schedule is about 59.52. At 75% you keep 126 hours you can sell and about 79.37 per hour — roughly one third higher. After you calculate, the bar comparison shows that gap.

The “Fill about 7.65% of pay” button only suggests an approximate employer FICA share (Social Security plus Medicare). It is not FUTA, SUTA, workers’ compensation, or benefits — replace it with your own figure anytime. Other costs assigned to the person, such as a share of rent or tools, add in before the division.

Client mark-up multiplies the cost you already have (after taxes, other costs, and billable share). 50% on 62.50 is 93.75. A 25% margin uses different arithmetic: 62.50 ÷ 0.75 ≈ 83.33. Pay and hours must cover the same period.

The result uses the currency you enter for pay. A decimal in 8000.5 works. Do not type thousand separators. The calculator does not read statutory overtime tables and is not an accounting quote.

How to use

  1. Enter monthly pay, for example 5000.
  2. Enter hours from that same month, for example 160.
  3. Click Calculate.
  4. To include payroll taxes, open the lower section and type them or use the button.
  5. If you bill only part of the schedule, enter that percent — for example 75.

Pay, taxes, hours

Hourly cost = total cost ÷ hours you can actually sell. At 75% of 168 hours the denominator is 126.

W
Pay for the period. It must match the same hours.
S
Employer payroll taxes. Empty = 0. The about 7.65% button only suggests an amount.
Hpaid
Hours you pay for.
share %
How much of those hours you can invoice. Empty = 100%.

Real-life examples

Example 1

8000 pay + 2000 payroll taxes over 160 hours → 62.50 per hour.

Example 2

$5000 + 382.50 FICA over 173 hours at 75% billable → about $41.48 per hour.

Example 3

10,000 over 168 hours at 75% billable → about 79.37 per hour (full-schedule trap).

Example 4

10,000 over 168 hours at 75% billable with 30% mark-up → about 103.17 per hour for the client.

Example 5

5000 over 160 hours with no payroll taxes → 31.25 per hour.

Example 6

9000 + 1800 payroll taxes over 180 hours → 60.00 per hour.

Ways to use this

  • Check what a sellable hour really costs before you quote a job or retainer.
  • Show a crew the gap between 168 paid hours and a 75% billable share.

Related calculators

Margin on selling price
Margin as a percent of price.
Mark-up on cost
Mark-up as a percent of cost.
Price from mark-up
Selling price from mark-up.
Price from margin
Selling price from margin.
Gross profit
Price minus cost.
Break-even
Units to cover fixed costs.

All business calculators

Frequently asked questions

How do you calculate labor cost per hour?

Add pay, employer payroll taxes, and any other costs for that person, then divide by hours. If you leave billable share empty, the calculator divides by every hour you pay for. For example, 8000 pay plus 2000 in taxes over 160 hours is 62.50 per hour. The same 10,000 at 160 hours with 75% billable (120 hours) is about 83.33 per hour.

What is the difference between paid and billable hours?

Paid hours are time you pay for, usually a full schedule with leave inside salary. Billable hours are the share you can put on a customer invoice. Leave, drive time, and admin lower that share. An empty percent field means you cost every scheduled hour.

How do you include employer FICA in the hourly cost?

Type the amount in the payroll-tax field, or use “Fill about 7.65% of pay.” That button only suggests an approximate employer FICA share (Social Security plus Medicare). It is not FUTA, SUTA, workers’ compensation, or benefits — replace it with the figure from your own payroll anytime.

How does mark-up on the rate differ from margin?

Mark-up multiplies the cost you already have: 62.50 × 1.50 = 93.75. A 25% margin uses different arithmetic: 62.50 ÷ 0.75 ≈ 83.33. The amount 78.13 would be a 25% mark-up, not a 25% margin.

Must pay and hours cover the same period?

Yes. A yearly salary goes with yearly hours, and a monthly salary with monthly hours. Mixing periods makes the result meaningless.

Why does pricing from 168 paid hours often understate cost?

Because not every hour you pay for returns on an invoice. With a 10,000 period cost and 168 paid hours you get about 59.52 per hour. At 75% billable (126 hours) the same cost is about 79.37 — roughly one third higher. That gap shows up often when you price services.

How do you calculate hourly labor cost at 75% billable?

Enter 75 in the billable-share field. The calculator divides total cost by 75% of the hours you pay for. With 10,000 and 168 hours the denominator is 126 hours, and the result is about 79.37 per hour.

How much does a $20 an hour employee cost an employer?

Start from loaded pay, not the wage alone. If monthly pay is 3,200 and employer FICA is about 7.65% (around 244.80), with 160 paid hours and no billable cut you get about 21.53 per hour. At 75% billable the same cost is about 28.71 per hour — before FUTA, SUTA, workers’ compensation, or benefits.

How do you get a loaded or client hourly rate here?

Enter pay and payroll taxes (or the FICA estimate), then a billable share such as 75. The main result is cost per billable hour. Optional mark-up multiplies that cost for a selling rate — for example about 79.37 per hour with a 30% mark-up is about 103.17 per hour for the client. That is mark-up on cost, not margin on price.

What currency is the result in?

The same currency you enter for pay. The header currency control only changes how the amount is written; it does not convert exchange rates.

How is this different from an hourly rate from salary?

Here you build employer cost: pay, payroll taxes, optional overhead, and the share of hours you can sell. An hourly-rate-from-salary page usually divides the stub amount by hours alone.

Does the calculator replace payroll or a full burden table?

No. It is a simple model from the numbers you enter. The tax estimate is approximate and meant for a quick pricing check, not a filing or a full burden worksheet.

· Hubert Ligocki

At 10,000, 168 paid hours, and 75% billable, the result is about 79.37/h — not 59.52 from a full schedule.

Knowledge sources

Hourly labor cost is arithmetic from your numbers. Below is context for labor cost and payroll taxes — not a full burden table.

Page updated November 4, 2026.