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Calculator · Free

Effective Hourly Rate Calculator

See what you actually earn per hour worked — field time, admin, sales, and drive time included.

Business results
$/yr
$/yr

Everything except your draw — labor, materials, overhead.

$/yr

What you actually took out. Leave blank to use net profit.

Hours worked

Be honest — include every hour you spent on the business this year.

hrs/yr
hrs/yr

Estimates, invoicing, scheduling, bookkeeping.

hrs/yr
hrs/yr

Windshield time between jobs and supply runs.

Effective hourly rate

$30.36per hour worked

$85,000 divided across 2,800 total hours — field, admin, sales, and drive.
Total hours worked
2,800 hrs
Non-billable hours43% of your time never hits an invoice
1,200 hrs
Revenue per hour worked
$101.79/hr
Field-only rateIf you only count field hours — the optimistic number
$53.13/hr
Implied shop rateRevenue ÷ field hours only
$178.13/hr
Gap: shop rate vs. effective
$147.77/hr
Where your hours go
ActivityHoursShareCompensation per hour
Field / billable1,60057.1%$53.13/hr
Admin52018.6%Unpaid
Sales & estimating2609.3%Unpaid
Drive time42015.0%Unpaid
Total2,800100.0%$30.36/hr

You are earning less per hour than most employees in your trade

You bill an implied $178.13/hr in the field but take home $30.36/hr for every hour worked. The $147.77/hr gap is 1,200 hours of unpaid admin, sales, and drive time. Hiring part-time office help or raising prices closes this faster than working more field hours.

Quick answer

Effective hourly rate is owner take-home divided by all hours worked — field, drive, admin, and sales — not just billable time. A contractor billing $125/hour who nets $85,000 across 2,600 total hours keeps about $33/hour in real life. Compare that to a journeyman wage: if effective rate is lower, the problem is utilization, pricing, or overhead — not more hours alone. Enter compensation and hours below to see what you actually earn per hour of work.

What this assumes

  • Owner compensation is your draw or net profit after expenses, whichever you enter.
  • All working hours count — field, admin, sales, and drive time.
  • Does not subtract estimated taxes; use the estimated tax calculator for after-tax take-home.

Important

A high shop rate means nothing if you work 70-hour weeks. This tool shows what you actually take home per hour of your life spent on the business.

Understanding the result

Shop rate and take-home rate are different numbers

Your shop rate is what customers pay per billable hour. Your effective rate is what you keep per hour you actually work — including estimates, invoicing, supply runs, and the drive home. Most owner-operators discover a $40 gap between the two.

Admin time is unpaid labor

Ten hours a week on estimates, scheduling, and collections is 520 hours a year at $0 billed. If you net $90,000 and work 2,600 total hours, your effective rate is $35/hour — even if you bill $125/hour in the field.

The goal is to raise effective rate, not just shop rate

Hiring an office manager, flat-rate pricing, and better routing all raise effective rate without changing what customers pay. A 10% shop rate increase that loses 15% of volume can lower your effective rate.

Compare to a W-2 wage honestly

A journeyman earning $38/hour plus benefits often clears $50/hour in total compensation. If your effective rate after taxes is $32/hour while carrying liability, collections, and sales risk, you are subsidizing the business with cheap owner labor — a signal to raise prices or cut unpaid hours.

How the math works

Sum revenue from a period, subtract materials and subs, divide by all owner+employee field hours (billable and non-billable) to show realized $/hr — contrasts with target shop rate from hourly-rate calculator.

Where to find each input

  • Accounting export — P&L for month or quarter
  • Payroll hours — all field staff
  • Materials and subcontractor lines
  • Owner hours even if not on timesheet

Worked examples

Month $42k revenue, $12k materials, 320 field hr

Owner included in hours.

Effective ~$94/hr before overhead — compare to $105 target shop rate (gap = overhead leak or underbilling).

Heavy materials month

Equipment install job, materials 55% of revenue.

Effective rate on labor portion higher — tool shows labor-only effective if toggled.

Slow week with drive time

Low revenue, full hours logged.

Effective rate crashes — signals scheduling or minimum charge issue.

What this does not include

  • Tax timing or accrual adjustments
  • WIP on open jobs unless you accrue revenue
  • Shop-only staff hours unless allocated

Regional adjustment

Effective rate is internal — not regionalized. Compare targets using local market rates from pricing guides.

Accuracy and references

Methodology from PHCC Financial Performance Report and E-Myth style labor productivity metrics.

Counterpart bridge

What homeowners see for the same decision

Homeowners use the paired tool for benchmarks and questions before they hire. Align your numbers with what they are already comparing against.

Open DIY or Hire a Pro

Homeowner counterpart

We publish DIY or Hire a Pro for the same decision from the customer side — use it to sanity-check how your bid will read against national ranges.

View DIY vs. Pro

Common questions

What is an effective hourly rate for a contractor?
Effective hourly rate is total owner compensation divided by all hours worked — field, drive, admin, and sales. A contractor billing $130/hour who works 55 hours a week and nets $85,000 has an effective rate of about $30/hour.
What is a good effective hourly rate?
Owner-operators should target $50 to $80/hour effective — comparable to a skilled W-2 trade wage plus benefits. Below $35/hour, you are earning less than most journeymen while carrying all business risk.
How is effective rate different from shop rate?
Shop rate is revenue per billable hour. Effective rate is take-home per total hour worked. Shop rate of $125/hour at 60% utilization and 20 hours of admin per week yields an effective rate near $45/hour on a $90,000 net.
Should I include drive time?
Yes. Windshield time is work even when it is not billed. Excluding drive time inflates your effective rate and hides the cost of scattered job sites and poor routing.
How do I raise my effective hourly rate?
Reduce non-billable hours (hire admin help, improve routing), raise prices on low-margin work, drop unprofitable customers, and flat-rate common jobs to eliminate estimating time. Each cuts unpaid hours or raises revenue per hour worked.
What is a bad effective hourly rate for an owner-operator?
Below $35/hour net before personal taxes usually means you earn less than many employees while carrying business risk. Below $25/hour is unsustainable unless the business is intentionally in a growth phase with documented reinvestment.
Should I include taxes in effective hourly rate?
Calculate effective rate on pre-tax owner compensation first so you can compare to W-2 wages. Then run the 1099 estimated tax calculator on the same net profit to see after-tax take-home per hour — that is the number you live on.
How many hours should a contractor owner work?
Sustainable owner-operators often work 45 to 55 hours a week total. Above 60 hours, effective rate may look acceptable on paper but burnout and callback rates rise. If you must work 70 hours to hit income goals, pricing or staffing is wrong — not your effort.
Why is effective lower than shop rate?
Unbillable time, discounting, and material-heavy jobs drag effective down.
Include sales tax collected?
Exclude pass-through tax from revenue.
How handle WIP?
Use completed jobs only for cleanest read.
Owner salary in overhead?
Pick one method — owner in hours or in overhead, not both.
Monthly vs rolling 12?
Rolling 12 smooths seasonality for HVAC/roofing.
Should subs reduce hours?
Sub cost in materials/subs line; hours are in-house only.
What is a good effective rate?
Should meet or exceed burdened cost per hour — compare to hourly-rate output.
Can it exceed shop rate?
Yes on material-light, high-efficiency weeks.
Track by tech?
Run per employee if timesheets allow — finds training gaps.
Does this replace job costing?
No — complement; job-profitability per contract still required.

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