How much should a contractor charge per hour?

The three numbers

Loaded labour cost. The wage, plus employer CPP and EI, workers' compensation, vacation and statutory pay, benefits and allowances — spread across the hours you can actually bill rather than the hours you pay for. A $32 wage typically lands somewhere near $54 per billable hour once all of that is counted. Work yours out here.

Overhead per billable hour. Monthly overhead divided by monthly billable hours. Truck, insurance, phone, software, shop, accounting, marketing, and your own unbilled quoting and admin time. For a small residential contractor it's usually $12–25 an hour. Work yours out here.

Target net margin. What you intend to keep out of the price, as a percentage of the price. 10–20% is a reasonable target for residential trades.

Putting them together

Add the first two to get your break-even rate — the number below which you are paying to work. Then divide, don't multiply, to add the margin: rate = break-even ÷ (1 − margin).

Worked through: $54 loaded labour plus $15 overhead is a $69 break-even. For a 15% margin, $69 ÷ 0.85 = $81.18. Round it to $82 and quote that. Over 1,400 billable hours a year, the difference between $69 and $82 is about $18,000 — the difference between a business and a job you own.

The hourly rate calculator runs this live if you'd rather move the numbers around.

You probably need more than one rate

A helper's hour and a licensed journeyman's hour cost you different amounts, so charging one blended rate means overcharging for one and losing money on the other. Most contractors settle on two or three: a crew rate, a lead or licensed rate, and a service-call rate that's higher because diagnosis and drive time are real costs that don't appear on the invoice as hours.

Quote fixed price, price it hourly

Customers buy certainty. Give them a fixed price for a defined scope, and use the hourly maths privately to make sure the fixed price is right. Reserve hourly billing for the things nobody can scope in advance — troubleshooting, discovery behind walls, and change orders — and say on the estimate which rate applies.

When the number comes out higher than the market

First check your inputs, especially billable hours: optimistic hours make everything else look better than it is. If the inputs hold, you're looking at real information — either your overhead has outgrown your volume, or your non-billable time is fixable, or you're bidding against operations whose pricing won't survive the year.

The one response that never works is quoting below break-even to keep the crew busy. You cannot make it up on volume when every unit loses money; volume just gets you there faster.

Raising your rate

Change it on new estimates, not mid-job. Give it a date. Don't apologise, don't explain at length, and don't announce it to every past customer — most people never notice a rate change; they notice an excuse.