# Billable rate calculator

> Your minimum billable rate is fully loaded cost divided by the hours you actually bill. Add your target margin to get the rate to charge.

Canonical URL: https://usepike.com/tools/billable-rate-calculator
Last updated: 2026-10-25

## The formula

- **Fully loaded cost:** Salary × (1 + employer cost %) + overhead per person
- **Billable hours:** Weekly hours × working weeks × target utilization
- **Break-even rate:** Fully loaded cost ÷ billable hours
- **Rate for target margin:** Break-even rate ÷ (1 − target gross margin)

## How to calculate a billable rate

1. **Add up the full cost of a person.** Salary plus employer taxes, pension, and benefits, plus a share of overhead: rent, software, finance, and admin staff.
2. **Work out billable hours.** Contracted hours times working weeks gives available hours. Multiply by target utilization to get hours you will actually bill.
3. **Divide cost by billable hours.** That is the break-even rate: every hour billed below it loses money.
4. **Add margin.** Gross margin is profit divided by revenue, so divide the break-even rate by one minus the margin. Adding 50% to cost gives a 33% margin, not 50%.

## Worked example

A consultant earns $80,000. Employer costs add 20% and overhead adds $18,000, for a fully loaded cost of $114,000. At 40 hours a week for 46 weeks there are 1,840 available hours, and at 75% utilization 1,380 of them are billable.

Break-even is $83 an hour. To earn a 50% gross margin, bill **$165 an hour**.

| Step | Calculation | Result |
| --- | --- | --- |
| Fully loaded cost | $80,000 × 1.2 + $18,000 | $114,000 |
| Billable hours | 40 × 46 × 75% | 1,380 h |
| Break-even rate | $114,000 ÷ 1,380 | $83 |
| Rate for target margin | $83 ÷ (1 − 50%) | $165 |

## Common rate-setting mistakes

- **Dividing salary by 2,080 hours.** That assumes every working hour is billable and ignores employer costs and overhead. The result is a rate that loses money.
- **Confusing markup with margin.** A 50% markup on cost is a 33% gross margin. Price from the margin you want.
- **One rate for every role.** Seniors cost more and bill fewer hours. Use a [rate card](https://usepike.com/glossary/rate-card) by role, then check the [blended rate](https://usepike.com/glossary/blended-rate) on each project.
- **Ignoring write-offs.** If you write off a share of hours, your [realization rate](https://usepike.com/glossary/realization-rate) lowers the rate you actually earn. Raise the rate or fix the scope.

## Rates and costs, live in Pike

Every logged hour carries both its billing rate and its cost.

Pike stores a cost profile for each member, so billable value, cost, and contribution update as time is logged, by person, project, and client. Cost profiles and profitability are on the Growth plan.

## Billable rate questions

### How do I calculate my billable rate?

Add salary, employer costs, and overhead to get fully loaded annual cost. Divide by billable hours per year (available hours × target utilization) for the break-even rate. Divide that by one minus your target gross margin for your billing rate.

### What is a fully loaded cost?

Fully loaded cost is salary plus employer taxes, pension, benefits, and a share of overhead such as rent, software, and admin staff. It is what a person really costs the firm each year.

### What is the difference between markup and margin?

Markup is profit as a share of cost; margin is profit as a share of revenue. Pricing at cost plus 50% gives a 33% gross margin. To get a 50% margin, charge twice the cost.

### How many billable hours are in a year?

It depends on contracted hours, leave, and utilization. 40 hours a week for 46 working weeks is 1,840 available hours; at 75% utilization that is 1,380 billable hours.

## Related tools and guides

- [Utilization calculator](https://usepike.com/tools/utilization-calculator): Check whether the team bills the hours your rate assumes.
- [Project margin calculator](https://usepike.com/tools/project-margin-calculator): See whether a live project still earns its margin.
- [Agency rate card guide](https://usepike.com/blog/agency-rate-card): Structure rates by role and client.