Loaded Labor Rate Calculator
Enter what the employee costs you in a year, the hours they are paid for but not productive, and the overhead each productive hour must carry. The calculator gives the loaded cost per productive hour and the billable rate at your markup.
Loaded cost per productive hour
$51.14 / h
Billable rate at the markup
$76.70 / h
Productive hours per year
1,760
Paid hours per year
2,080
Productive share of paid hours
84.62%
Employee cost per productive hour
$42.61 / h
Overhead per productive hour
$8.52 / h
Employee cost per paid hour
$36.06 / h
Margin on the billable rate
33.33%
Annual billings at the billable rate
$135,000.00
How it works
An employee is paid for every hour of the year they are on the payroll, but only some of those hours produce work you can charge for. Paid holidays, vacation and sick days produce nothing, and neither do training, meetings, admin and travel. The loaded labor rate spreads the employee's full annual cost, plus the overhead they carry, over the productive hours only.
Paid hours are the hours per week times 52: 2,080 at 40 hours, the standard full-time year. Productive hours are what is left after paid time off and non-productive time. Dividing the annual cost by productive hours rather than paid hours is what makes the loaded rate higher than the simple hourly cost.
Overhead can be entered either as an annual amount allocated to this employee, which is spread over their productive hours, or directly as an amount per productive hour. The billable rate adds your markup to the loaded rate; the margin is the share of that billable rate left after cost.
Formula
paid hours = hours per week × 52 productive hours = paid hours − paid time off − non-productive hours overhead per hour = allocated overhead ÷ productive hours (or entered directly) loaded rate = (annual employee cost + allocated overhead) ÷ productive hours billable rate = loaded rate × (1 + markup) margin = markup ÷ (1 + markup)
Example
An employee costing $75,000 a year is paid for 2,080 hours, or $36.06 per paid hour. Taking off 120 hours of paid time off and 200 non-productive hours leaves 1,760 productive hours (84.62%), so the employee cost is $42.61 per productive hour.
Allocating $15,000 of overhead adds $8.52 an hour, for a loaded rate of $51.14 per productive hour. A 50% markup gives a billable rate of $76.70, a 33.33% margin, and $135,000 of billings over the year.
Assumptions and limitations
- Results are for informational and educational purposes and are not financial, tax or accounting advice.
- The annual employee cost is your figure. It is meant to include employer payroll taxes, benefits and other per-employee costs, not just pay; the True Cost of an Employee calculator builds it.
- The non-productive hours, overhead and markup defaults are illustrative; your own timesheets and books give the real figures.
- Every productive hour is assumed to be billed at the billable rate. Unsold capacity, write-offs and discounts lower the realised rate.
- Overtime, which changes both the cost and the hours, is not modelled; see the Overtime Cost calculator.
Frequently asked questions
Why divide by productive hours instead of 2,080?
Because the cost is the same whether or not an hour is productive. If the employee costs $75,000 and only 1,760 hours can be charged, each charged hour has to recover $75,000 ÷ 1,760 = $42.61, not $75,000 ÷ 2,080 = $36.06. Pricing at the lower figure leaves the cost of the unproductive hours unrecovered.
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