Invoicing - Part 2: How to Calculate Labor Pay Rate and Labor Cost Rate


Most people don't love this side of the business but it doesn't have to be complicated if we don't let it. Tonya from The Profit Constructors and Duane from ClockShark show you EXACTLY what to do and include in your rates, so you can calculate them accurately and STOP leaving money on the table, ASAP!

Check out Part 3 of the Invoicing series to determine your BILLABLE rates.


You calculate that down on an hourly rate? Because I'm thinking in my head, I'm like, well, I just wrote a $27,000 check for this new truck. I've got the gas costs me $300 a week. Like, how do you take all of these costs and be like, it costs me an hourly x to pay for everything. Like, how do you how do you do that? Like, what's the basic napkin math formula?

Well, that's why I said we use a tool. Yeah, but, you know, really, like I said, if you start with taxes and insurance, what we often do is have people think through. Like I said, your personal protective equipment. Maybe you're issuing uniforms, but we really just have people make a list. That's how we usually start. Just make a list of all of the things that you're spending because of that. And then you can annualize that cost. You're entering that data into your system. You annualize that cost, and then you once you've annualized it, then you can break it down into hourly chunks.

That's kind of what I was thinking, too. It was hey, there's, you know, how many workable hours in a year on average. And then you just divide that and they add it to and then you would add that to the pay rate, right?

Correct. One thing when you said workable hours, I say that's a really good point, because keep in mind that when you hire those guys, you're probably offering them vacation probably. And requiring them to do safety meetings. If they're foremen, you're probably requiring them to do some time tracking of other guys. So whatever those hours are that they're not actually physically doing work on the job site, you're going to want to remove those hours back out of your calculation of how many hours interesting a year.

So don't just do Monday through Friday, 52 weeks a year?

No. You're going to want to take out anytime they're not physically working on the job before you calculate that cost rate for the job. It actually makes your cost rate go up.

Yes, I was going to say that's probably a little bit more.

Yes, and that's what you want. You want to really see the cost. Because really what we're saying is those that the time that guy is not spending on the job is an added cost and that needs to go into his cost rate. 

9,500+ companies use ClockShark to track employees and save time every month.

Get Started Free

No credit card required.