Charge-Out Rate Calculator
Estimate the hourly rate you need to cover staff costs and overheads at your target profit margin.
Annual Costs
Enter additional costs such as employer super.
Billable Capacity
Exclude leave and other time away from work.
Pricing Target
The share of revenue you want to keep as profit.
Results
Hourly rate before GST
$100
Annual billable hours
1,000 hours
Recoverable annual costs
$80,000
Cost per billable hour
$80
Annual revenue at this rate
$100,000
The estimate assumes you bill every hour counted as billable. Annual revenue uses the hourly rate before rounding.
The Costs Your Rate Must Recover
Recoverable annual costs include salary or wages, employment on-costs and the share of overheads that supports the work. Add costs such as employer super and workers’ compensation insurance once. If the salary figure already includes super, leave that amount out of employment on-costs.
Allocate only the share of shared expenses this work uses, such as a portion of your office rent or software costs. The business.gov.au hiring guide lists costs to budget for. Use the Australian Taxation Office’s super guidance and the Fair Work Ombudsman’s wage guidance when working out your own employment costs.
The hourly result is for internal cost recovery before goods and services tax (GST). Whether you can charge a client fee depends on the rules and agreements that apply to the work. The price clients will pay depends on the market. See the business.gov.au pricing guide for how costs and market conditions inform pricing.
Paid Hours Are Not Billable Hours
Annual billable hours equal weeks worked multiplied by hours worked per week and the billable share as a decimal. Take leave out of weeks worked. Take administration, training and business development out of the share of time you can bill.
In the example, 40 weeks at 40 hours a week gives 1,600 working hours. At 62.5% billable, that leaves 1,000 billable hours. Counting hours you can’t bill spreads the same costs across too many hours and understates the rate you need.
Set a Margin on Recovered Costs
Divide annual recoverable costs by annual billable hours to get your cost per billable hour. Then divide that hourly cost by one minus the target margin as a decimal. A 20% margin means dividing the hourly cost by 0.8.
In the example, $64,000 in wages, $9,500 in on-costs and $6,500 in overheads add up to $80,000. Across 1,000 billable hours, that costs $80 per hour. A 20% margin requires $100 per hour before GST.
A 20% markup adds $16 to the $80 hourly cost, giving a $96 rate. That leaves a margin of 16.67% because the $16 is divided by $96 in revenue.
Check the Capacity and Rate Together
Annual revenue is the calculated hourly rate multiplied by billable hours. Billing 1,000 hours at $100 brings in $100,000. After $80,000 of costs, $20,000 remains as profit, or 20% of revenue.
With the same wages, on-costs and overheads, drop the billable share to 50%. The business can now bill 800 hours. The rate rises to $125 per hour to reach the same $100,000 annual revenue and $20,000 profit.
The calculation needs billable hours above zero and a target margin below 100%. With zero billable hours, there are no hours across which to recover costs. At a 100% margin, none of the revenue is available to cover costs.
