How to Calculate a Plumbing Company's Billable Hourly Rate

1. Start with scheduled hours, then subtract

Scheduled hours per tech might be 8 hours × 5 days × 52 weeks = 2,080. From that, subtract everything the tech is paid for but cannot bill: holidays, PTO, drive time between jobs, shop time, training, and callbacks. What remains is the only time that earns revenue. In the worked example below, a shop schedules 2,000 hours per tech and bills 1,400, which is 70% billable efficiency. That is the illustrative scenario only, not a benchmark; your ratio depends on your call mix, drive time, and schedule.

2. Work out labor cost per billable hour

Techs are paid for every scheduled hour, but only billable hours earn revenue. So take the wage, add labor burden (payroll taxes, workers' comp, and benefits; the percentage varies by shop and location, so use your own figures), multiply by paid hours, add the annual vehicle cost per tech, and divide by billable hours. The burdened cost spread over fewer hours is why the billable rate is always much higher than the wage.

3. Add overhead per billable hour

Add rent, insurance, office staff, software, marketing, tools, and accounting. The whole annual overhead total gets divided by the company's total billable hours (all techs combined). More techs billing more hours spreads the same overhead thinner.

One caution: count owner pay exactly once. If you pay yourself a salary for non-billable work, it belongs in overhead. If you pay yourself an hourly wage for billable work you personally perform, it belongs in the wage line. Put it in both and your rate comes out too high; in neither, too low.

4. Break-even first, then margin, not markup

Break-even rate = labor cost per billable hour + overhead per billable hour. Charge that and the company covers its costs with nothing left over.

To add profit, decide on a target margin, which is the share of the final price that is profit. Then divide: rate = break-even ÷ (1 − margin). Margin and markup are not the same thing. A 20% margin means profit is 20% of the price; the equivalent markup on cost is 25%. Confusing the two quietly underprices every job.

5. A worked example (illustrative numbers)

Made-up round numbers for a two-tech shop, purely to show the math:

Whether to round that to $169, $170, or $175 is a shop choice, not a math result. round deliberately and know which direction you chose.

6. What this rate is and is not

This rate covers labor and overhead. If you mark up materials separately (most shops do), keep material costs out of this calculation so you are not recovering them twice. And the result is an estimate built from your assumptions: what you actually realize depends on hitting the billable hours you assumed, collecting what you bill, and costs staying near plan. No calculator output guarantees profit. It gives you a defensible number to work from and revisit.