LoadingLoadingLoadingLoadingAn employee on £18 an hour does not cost £18 an hour, and does not sell 40 hours a week. This works out the real annual cost, divides it by the hours you can actually invoice, and tells you what to charge.
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Charge-out rate
£49.76
What to charge per hour to clear 30% on their time.
Break-even rate
£34.83
Cost per billable hour. Charge this and you make nothing.
Per hour at work
£26.12
The same cost over every hour they are there, billable or not.
Employer NI and pension are not in these figures yet. Enter both above — together they typically add a fifth to the cost of an employee, and every rate on this page is too low until they are in.
Set this rate once in Cushty and it follows your team onto every quote, job and timesheet — so the hour you charge is the hour you costed.
See how job management worksThe sum has two halves, and the second one is where rates go wrong. First, everything a year of this employee costs: their pay, the employer charges that follow from it, and the things they carry. Second, the hours left to sell after holiday, sickness and everything that happens between jobs. Divide one by the other and you have the rate that breaks even; gross that up to your target margin and you have the rate to quote.
Charge-out rate = ( pay + employer NI + pension + van and tools + overhead ) ÷ ( ( 52 − holiday − absence ) × hours per week × utilisation ) ÷ ( 1 − target margin )
Holiday appears once, in the denominator, and never in the numerator. That is deliberate: paid leave is already inside the pay figure, so adding it as a cost as well charges you for the same fortnight twice. What it genuinely does is remove hours you could have sold, which is what the denominator is for.
These are the figures the calculator opens with, with employer NI at 15% above £5,000 and a 3% pension on a £6,240–£50,270 band entered by hand. Follow it through and the shape of the answer is clear.
£53,242 ÷ 1,362 hours = £39.09 an hour to break even, or £55.84 at a 30% margin — against a wage of £18.
The rate is one input into pricing work. These pick up the rest.
Nobody sets out to sell an employee's hour below cost. It happens because the wage is the only number anyone can see. Employer NI, the pension, the van, the tools and the share of the office are all real, all monthly, and none of them appear next to "£18 an hour" when a price is being quoted over the phone.
The second half is worse, because it looks like good news. A 40-hour week feels like 40 sellable hours. After holiday, sickness, travel between jobs, loading, waiting on materials and tidying up, a well-run employed trade sells nearer 27. Price against 40 and every hour is roughly a third light before a single cost is missed.
Free calculators that pick up where this one stops.
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