Electrical Labor Rate Calculator

This calculator allows you to accurately estimate the cost of labor—start to finish—on electrical projects.

What is an electrical labor rate calculator?

An electrical labor rate calculator is a tool used to estimate the cost of labor for electrical jobs. It takes into account factors like hourly wage, overhead costs, profit margin, and markup to determine a comprehensive labor rate.

Why should I use an electrical labor rate calculator?

Using a labor rate calculator helps ensure accurate and fair pricing for both your business and your customers. It provides a transparent estimate, helps in budgeting, and can prevent those pesky little disputes over labor costs. 

How do you calculate an electrical labor rate?

A simple formula for calculating electrical labor rates might look like this:

Labor Rate = (Hourly Wage + Overhead Costs + Profit Margin) × Markup Factor

Let’s break each of those down.

• Hourly Wage: This is the rate you pay each electrician hourly for electrical jobs. It can vary based on experience and skill level (master electrician, journeyman, or apprentice), as well as the geographical location and type of electrical work, overhead costs, and market demand.
• Overhead Costs: These are the indirect costs associated with running an electrical business. Average annual overhead costs take into account all fixed and variable assets required to operate the business. Think insurance, tools, equipment, office space, administrative costs, vehicle maintenance, and more. Divide your annual overhead costs by the total number of billable hours worked by your team of electricians in a year to get the overhead cost per hour. 
• Profit Margin: This is the percentage of profit you want to make on top of covering your average costs. It’s the net amount your business walks away with. 
• Markup Factor: This is a multiplier that helps cover the overhead costs, profit margin, and other miscellaneous expenses.

Steps to Pricing Electrical Labor 

Calculate the number of electricians on payroll.

First, figure out how many revenue-generating electricians you plan to employ over the next 12 months. Include new hires or job reductions. For instance, if you plan to open a new department, be sure to include those new employees in your calculations.

Determine how many billable hours each electrician works each year.

To calculate your team’s annual billable hours, you need to first know the total available working hours and your team’s total non-billable hours (think vacation days and holidays) in a year. 

For this example, let’s say each of your electricians works 40 hours a week and annually receives 10 days off for vacation and 7 days off for federal holidays.

Calculate the number of available working hours:

You can determine the total available working hours by multiplying each electrician’s weekly hours by the number of weeks in a year (52).

40 hours × 52 weeks = 2,080 total available working hours

Calculate the number of non-billable hours:

Next, determine the total non-billable hours by multiplying the number of vacation days and holidays each electrician receives by the number of hours in a typical workday (8).

(10 vacation days + 7 holidays) × 8 hours = 136 hours per year spent not working on business days

Calculate the number of working hours:

Once you know the total non-billable hours, subtract that number from the total available working hours each year to determine the number of annual working hours per electrician.

2,080 hours – 136 hours = 1,944 hours per electrician

Enter the total annual working hours per electrician into the labor cost calculator.

Calculate projected billable hours per electrician.

To determine projected billable hours per electrician, you must calculate what percentage of their workday results in billable hours on average. For most electricians, 30% is considered a good efficiency rate (billing 2.4 hours out of an 8-hour day), while 50% would deliver extremely efficient employee costing (billing 4 hours out of a typical workday).

Once you estimate that average billable efficiency rate, convert the percentage into a decimal (30% = 0.30) and multiply it by the total available working hours per year. 

So, using the total of 1,944 available work hours at a 30% utilization rate, you’re left with 583.2 billable hours per electrician annually. You’ll enter that total for projected annual billable hours into the calculator to help calculate your direct labor cost. 

Direct labor cost formula:

1,944 available work hours × 0.30 average billable efficiency rate = 583.2 projected billable hours per electrician each year

Calculate total billable hours for the company to cover overhead only.

To calculate the total billable hours for the company overall, take the approximate number of billable hours each electrician works and multiply it by the number of electricians you plan to employ over the next year. For this example, let’s say you plan to have 5 electricians.

Labor costing formula:

583.2 annual billable hours × 5 electricians = 2,916 total billable hours 

Next, divide your total overhead cost by the team’s total billable hours in a year to get the hourly rate that would cover overhead only. For this example, let’s say overhead costs are $100,000.

Overhead cost formula:

$100,000 overhead costs / 2,916 total billable hours = $34.29 per hour to cover overhead costs only

Calculate your break-even labor rate per sold hour.

Now determine how much your electricians charge per hour to cover both overhead and the cost of labor for all electricians working during billable hours. Calculate your bottom line to break even for billable time. 

Let’s say your electricians cost you an average hourly rate of $28, and you employ a team of 5 that works a total of 2,916 billable hours per year. Multiply your average hourly rate per electrician ($28) by the total billable hours (2,916) to get your electrician payroll cost. Add that number to your overhead cost for the grand total of expenses accrued during billable hours.

Direct labor formula:

(Annual Billable Hours per Electrician) × (Number of Electricians) = (Total Billable Hours for Company) × (Average Hourly Rate per Electrician)

Employees cost calculator:

583.2 billable hours × 5 electrician = 2,916 total billable hours

2,916 total billable hours × $28 per hour = $81,648 electrician payroll cost 

Calculate total expenses:

$81,648 for electricial payroll + $100,000 for overhead = $181,648 total expenses

Calculate the break-even labor rate per billable hour:

To calculate the break-even labor rate, divide that expense total by the total number of billable hours for your team. 

$181,648 / 2,916 hours = $62.29 per billable hour

Determine your desired net profit.

Last, but not least, determine the billable rate needed to reach your desired net profit. For this example, let’s say you’d like to achieve 30% net profit. 

Calculate direct labor rate for profitability:

First, convert your desired net profit percentage into a decimal by dividing it by 100.

30% / 100 = 0.30

Next, subtract that amount from 1.

1 – 0.30 = 0.70

Lastly, divide your break-even rate per billable hour by that amount.

$62.29 / 0.70 = $88.99 billable hour rate to reach 30% net profit

Formula:

(Break-Even Rate per Billable Hour) / (1 – Desired Net Profit Expressed in Decimals) = Profitable Billable Labor Rate