Labor Rate Calculator for Service

Build a defensible service labor rate the way the best-run shops do it: cover your true cost of labor, spread your overhead across the hours you can actually bill, make up for loss-leader diagnostic fees and agreement discounts, then add the profit you want. Start in Simple mode for a fast number, or switch to Advanced for the full picture.

Create a free account to save & name your scenarios.

Step 1Technician Pay

Start with the wage and load it with taxes and benefits to get your true cost of an hour of labor.

Step 2Billable Time

Your labor cost is only spread over the hours you can bill. Lost time and non-billable time make billable hours far lower than paid hours.

Enter Step 2 for one technician. The technician count below scales these hours to the whole department, so your department overhead is spread across everyone.

Step 3Vehicle Cost (optional)

Add truck cost to your direct labor cost - but only if it is NOT already inside your department overhead below (don't count it twice).

A commercial vehicle is expensive to run. Aptora / Mr. HVAC research puts a standard commercial van near 98.6 cents per mile; many shops just use $1.00. Leave miles at 0 to skip truck cost.

Step 4Overhead → Breakeven

Every billable hour has to help pay the department's overhead. Use a proven rule of thumb, or enter your real department overhead.

Diagnostic / Travel Loss-Leader

A low diagnostic or travel fee is priced below your real rate. You have to make up that shortfall in your hourly rate - spread across the hours you bill each day.

Service Agreement Discount

If some of your labor is sold at an agreement discount, raise the rate so the discounted work still hits breakeven.

Profit & Parts

Add the net profit you want (raise it when you're busy, lower it when you need work), then set your parts markup.

Parts markup is shown for reference only. In this method labor carries the overhead and profit; parts are simply marked up enough that you never lose money on them.

Your Labor Rate

Everything updates instantly as you type.

Lowest Hourly Labor Rate $0.00 Your recommended minimum charge per billable hour.
Breakeven Rate$0.00
Labor Markup0.00
True Direct Cost$0.00
Billable Hrs / Day0
What builds your rate
Labor Truck Overhead Loss-leader Agreement Profit
True direct cost / billable hr$0.00
+ Overhead → Breakeven$0.00
+ Loss-leader recovery $0.00
+ Service agreement $0.00
+ Net profit → Final rate$0.00
Parts Multiplier (reference) 1.25×
Quick insight

Enter your wage and a few numbers to see how cost, overhead, loss-leaders, and profit shape your minimum labor rate.

How this calculator works

The goal is the lowest hourly labor rate that lets your service department break even, then adds the profit you want. It works like any factory pricing a product: figure out how much overhead there is to cover, and how many hours you have to cover it with.

  • Cost of labor. Your wage plus taxes and benefits, spread over the hours you can actually bill (not the hours you pay for).
  • How the tech is paid. Paid all day, billable only, or a split (high wage for billable time, minimum wage for the rest) change your true cost per billable hour.
  • Overhead. Use the rule-of-thumb labor-cost-to-sales percentage, or enter real department overhead dollars and let it spread across your annual billable hours.
  • Loss-leaders. A low diagnostic or travel fee is below your real rate, so the shortfall is spread over the hours you bill each day.
  • Service agreements. Discounted agreement work is grossed up so it still reaches breakeven.
  • Profit. Added as a percentage of the sale. Raise it when you're slammed; lower it when you need the work.
  • Parts. Labor carries the overhead and profit. Parts are just marked up enough (about 1.25x) that you never lose money on them.
  • Save as many named scenarios as you like - for example a busy-season rate and a slow-season rate.