Employee True Cost Calculator
What an employee really costs per year, per hour, and per productive hour.
Your numbers
Your result
- True annual cost
- $95,863
- Cost multiplier vs base wageTotal cost divided by base wages. Most employers land between 1.3 and 1.8.
- 1.65
- Cost per paid hour
- $42.87
- Productive hours per year
- 1,587
- Cost per productive hour
- $60.41
- Billing rate needed for a 45% margin
- $109.83
- Revenue this employee must generate
- $174,296
$28.00/hr actually costs $60.41 per productive hour
Once taxes, comp, benefits, vehicle, tools, PTO and non-billable time are counted, this employee costs 1.65× their base wage. To hold a 45% gross margin on their work you need to bill at least $110 per hour — and they need to produce about $174,296 a year.
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What this number actually tells you
The wage is the smallest part of what an employee costs. Payroll taxes, workers compensation, benefits, a vehicle, tools, a phone, uniforms, recruiting and training all stack on top — and then paid time off and non-billable hours shrink the hours you can actually sell.
That's why the number that matters is cost per productive hour, not cost per paid hour. A technician at $28 an hour with a truck, benefits and a 75% billable ratio often costs north of $70 per hour of billable work. If your rate was built off the wage, the math never worked.
This calculator produces the two numbers you need for pricing decisions: what the employee truly costs per productive hour, and the billing rate required to hold your target margin on their work.
How the math works
- 01Wages = (wage × paid hours) + (wage × 1.5 × overtime hours).
- 02Burden = wages × payroll tax % + wages × workers comp % + annual benefits.
- 03True annual cost = wages + burden + (tools + vehicle) × 12 + first-year recruiting and training.
- 04Productive hours = (paid hours − PTO hours) × productive %.
- 05Cost per productive hour = true annual cost ÷ productive hours.
- 06Required billing rate = cost per productive hour ÷ (1 − target gross margin %).
What to do with the answer
- Use cost per productive hour — not the wage — every time you price labor into a quote.
- Track the productive percentage from real timesheets. Drive time, shop time, warranty callbacks and waiting all belong in the non-productive bucket.
- Before granting a raise, run it here. A $2/hour raise usually costs $6,000–$8,000 a year once burden and lost productivity are included.
- Compare cost per productive hour across your team. The spread usually reveals a training problem, not a wage problem.
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Schedule Your Growth Assessment Or call (737) 888-0415Questions owners ask about this
What's the real cost of an employee beyond their salary?
Typically 1.3× to 1.8× base wages for a field employee. Payroll taxes add roughly 8–10%, workers comp varies from 1% to 15%+ depending on trade and rate, benefits add whatever you pay, and a truck plus tools can add $10,000–$15,000 a year on its own.
How many billable hours does a full-time employee actually produce?
Most field employees produce 1,300–1,600 billable hours against 2,080 paid hours, after PTO, holidays, drive time, shop time and administrative work. That's a 65–80% productive ratio, and it's the single biggest variable in true labor cost.
How do I use this to set my hourly rate?
Take cost per productive hour and divide by one minus your target gross margin. At $70 cost per productive hour and a 45% target margin, you need $127 per billable hour — before overhead recovery, which the service pricing calculator adds.
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