How much you want to take home per year
Insurance, vehicle, tools, office, etc.
Typical: 1,200-1,800 hours
Added on top for business growth
Rate Breakdown
Contractor Hourly Rate Guide
How to set a rate that covers your income goals, all overhead, and a profit margin for growth.
How to Calculate Your Contractor Hourly Rate
The right hourly rate covers your income goals, all business overhead, and a profit margin for growth. Most contractors undercharge because they skip overhead or forget to account for non-billable time.
Follow this step-by-step approach:
- Step 1 - Set your income goal: Decide how much you want to take home annually. This is your personal salary, before taxes.
- Step 2 - Add annual overhead: Total all business expenses for the year: vehicle costs, fuel, insurance, tools, licenses, phone, software, and any office costs.
- Step 3 - Determine billable hours: Not every working hour generates revenue. Subtract time for bidding, admin, travel, callbacks, and slow seasons. Most contractors bill 1,200 to 1,800 hours per year out of 2,080 possible working hours.
- Step 4 - Calculate base rate: Divide total required income plus overhead by billable hours to get your minimum rate.
- Step 5 - Add profit margin: Add a profit percentage on top using the formula: Rate with Profit = Base Rate / (1 - Profit% / 100). This covers business growth, slow periods, and reinvestment.
A 20% profit margin means for every dollar you bill, 20 cents stays in the business after paying yourself and all overhead.
Key Takeaways
- Non-billable time (bidding, admin, travel) must be accounted for when setting billable hours
- Overhead includes every recurring business expense, not just materials
- Profit margin is separate from your salary - it funds business growth
Average Contractor Hourly Rates by Trade (2026)
Hourly rates vary significantly by trade, region, and experience level. These ranges reflect what contractors charge clients, not take-home pay.
- General Contractor: $50-$150/hr depending on project size and complexity
- Electrician: $50-$100/hr for most residential and light commercial work
- Plumber: $45-$120/hr, with higher rates for licensed master plumbers
- Carpenter: $40-$80/hr for finish work, framing, and custom millwork
- HVAC Technician: $50-$100/hr for installation and service work
- Painter: $25-$50/hr for interior and exterior residential painting
Rates in metro areas like Seattle, San Francisco, and New York often run 30-50% higher than the national average. Service calls and emergency work typically command a premium of 1.5x to 2x the standard rate.
Key Takeaways
- Metro areas average 30-50% higher rates than rural markets
- Emergency and after-hours calls typically command 1.5x-2x standard rates
- Specialty skills and certifications justify rates at the top of your trade range
Maximizing Your Billable Hours
Every hour you spend on non-billable tasks reduces your effective hourly rate. Improving how you manage time is as important as setting the right rate.
- Track time precisely: Use a simple time-tracking app on your phone. Most contractors discover they bill 20-30% less than they think once they start tracking. What gets measured gets managed.
- Batch your admin work: Group invoicing, emails, and scheduling into dedicated blocks rather than handling them throughout the day. Two focused hours of admin per week beats scattered interruptions daily.
- Subcontract specialty work: If you spend hours on tasks outside your core trade, consider subcontracting them. Your time is worth more doing what you do best and billing at your full rate.
- Charge for travel on longer jobs: Travel time to remote job sites is real labor cost. Many contractors bill half their hourly rate for drive time beyond a 30-minute radius.
- Raise your minimum job size: Small jobs have disproportionate overhead per dollar billed. Setting a minimum project size improves your effective billable percentage.
Improving your billable hours from 1,200 to 1,500 per year at $75/hr adds $22,500 in annual revenue without raising your rate.
Key Takeaways
- Most contractors bill 1,200-1,800 hours out of 2,080 possible working hours per year
- Time tracking apps reveal where non-billable time actually goes
- Raising your minimum job size increases billable percentage across all projects
How to Use This Calculator
Enter Your Target Annual Income
Start with how much you want to take home each year. This is your personal salary goal before taxes, not the total revenue your business needs to generate.
Add Your Annual Overhead Costs
Total all recurring business expenses: vehicle costs, fuel, insurance, tools, licenses, phone, software, and any office expenses. Do not include materials you buy for specific jobs.
Set Your Billable Hours
Enter how many hours per year you expect to bill clients. Most contractors bill 1,200 to 1,800 hours after accounting for bidding, admin, travel, and slow seasons. The default of 1,500 is a solid starting point.
Review Your Calculated Rate
The calculator shows your minimum rate (covering salary plus overhead) and your rate with the profit margin added. Use the rate with profit margin as your actual billing rate.
Contractor Hourly Rate Formulas
Base Rate = (Annual Salary + Annual Overhead) / Billable Hours
Rate with Profit = Base Rate / (1 - Profit% / 100)
Annual Revenue = Rate with Profit x Billable HoursWhere:
- Annual Salary
- = Target personal income before taxes
- Annual Overhead
- = All recurring business expenses (insurance, vehicle, tools, office)
- Billable Hours
- = Hours per year actually billed to clients (typically 1,200-1,800)
- Profit%
- = Desired profit margin added on top of costs for business growth
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Frequently Asked Questions
How do I calculate my contractor hourly rate?
Add your target annual income and annual overhead costs together, then divide by the number of hours you expect to bill clients each year. This gives your minimum rate. To add a profit margin, divide the minimum rate by (1 minus your profit percentage as a decimal). For example, to add a 20% margin: Minimum Rate / (1 - 0.20) = Rate with Profit.
Example: $80,000 salary + $20,000 overhead = $100,000 needed. At 1,500 billable hours: $100,000 / 1,500 = $66.67 base rate. With 20% profit: $66.67 / 0.80 = $83.33/hr.
What counts as overhead for a contractor?
Overhead includes every business expense that is not a direct job cost. Common overhead items are: vehicle payments and fuel, liability and workers comp insurance, tool and equipment costs, cell phone and software subscriptions, business licenses and permits, advertising, and any office or storage space. Do not include materials or subcontractor costs you buy for a specific job, as those are job costs that should be billed directly to the client.
How many billable hours should I use?
Most independent contractors and small crews bill between 1,200 and 1,800 hours per year. A full work year is about 2,080 hours (52 weeks x 40 hours). The gap between 2,080 and your billable total accounts for time spent on bidding, admin, callbacks, travel, holidays, and slow periods. New contractors often overestimate billable hours. If unsure, start with 1,400 hours and adjust after tracking your actual time for a few months.
What profit margin should contractors add to their rate?
A profit margin of 15-25% is common for most contractors, with 20% being a practical target for those running a small crew or solo operation. This is separate from your personal salary. The profit covers business growth, equipment replacement, slow periods, and unexpected expenses. Without a profit margin on top of overhead, every slow month puts you in the red.
How does my hourly rate compare to other contractors?
Rates vary by trade and region. General ranges for 2026: General Contractors: $50-$150/hr, Electricians: $50-$100/hr, Plumbers: $45-$120/hr, Carpenters: $40-$80/hr, HVAC: $50-$100/hr, Painters: $25-$50/hr. Metro markets like Seattle, San Francisco, and New York typically run 30-50% higher than rural areas. If your calculated rate falls outside your local market range, adjust your overhead, billable hours, or income goal rather than blindly cutting your rate to match competitors.
Should I charge the same rate for all types of work?
Many contractors use different rates for different work types. Service calls and small repairs often command higher hourly rates than large project work because they have more overhead per dollar billed. Emergency or after-hours work typically runs 1.5x to 2x the standard rate. Specialty or licensed work (electrical panels, gas lines, structural repairs) also justifies a premium over general labor rates. Your calculator result is a good baseline rate, but you can and should adjust it based on job type, complexity, and urgency.
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