Hourly Rate Calculator for Australian Small Business

How to work out your hourly rate

Most people pick their hourly rate by looking at what the bloke down the road charges, adding or taking off five dollars, and hoping it works out. That's not pricing, that's guessing. And it's the single most common reason a busy business still has nothing in the bank at the end of the year.

Your rate has to cover four things. What you want to pay yourself. Your super. Every cost of running the business. And a profit on top, so there's something left over for slow months, new gear and growth. Miss any one of those and you're working for free somewhere in your week.

The bit almost everyone gets wrong is billable hours. You might work a 50 hour week, but if 15 of those go on quoting, driving, chasing invoices and cleaning the van, you only have 35 hours to actually charge for. Your whole year's costs have to be recovered across those 35 hours, not 50. That's why the calculator asks for billable hours separately, and why the number it gives you is usually higher than you expected.

What should a tradie charge per hour in Australia?

There's no single right answer, because it depends on your costs, not your trade. A sole trader sparky with a paid off ute and a home office has a very different break even to a plumber with a new vehicle on finance, an apprentice and a rented yard.

What we see in practice: once tradies run the numbers properly, the rate they need is often 20 to 40 percent above what they've been charging. The gap is almost always vehicle costs, insurance, unbillable time and no allowance for profit. If your calculated rate feels too high to say out loud, the problem usually isn't the rate. It's that the market has been getting your time cheap.

A few things to put in your running costs that people forget: vehicle registration, tyres and servicing, public liability and tool insurance, phone and internet, software subscriptions, accounting fees, bank fees, licences and renewals, training, and the cost of tools you replace each year.

Salon, beauty and barber: your chair rate

Salons work a bit differently, because you're often pricing a service rather than an hour. The maths still holds. Work out your hourly rate first, then check each service against it. If a cut and colour takes 90 minutes and you charge $140, that's $93 an hour before product. If your calculated rate is $110, that service is losing you money every single time you do it.

Two things salon owners under-count. Product cost per service, which is rarely as low as people think once you include colour waste, foils, towels and backbar. And downtime between clients, which is unbillable but still has to be paid for. Put your realistic booked hours into the calculator, not your opening hours.

Consultants, tech and professional services: rate and day rate

If you bill in days rather than hours, run the calculator on hours and multiply by the hours in your billing day. The trap for consultants is utilisation. A full time consultant who is 60 percent utilised has about 22 billable hours a week, not 38, and sales, proposals, admin and professional development eat the rest.

Put your honest utilisation into the billable hours slider and watch what happens to the rate. It's confronting the first time, and it explains why plenty of busy consultants are working hard for an average wage.

What should I charge my staff out at?

If you pay someone $38 an hour, they do not cost you $38 an hour. By the time you add super, WorkCover, annual leave, leave loading, public holidays, sick leave, their vehicle, their phone and their share of the office, the true cost is usually somewhere between 1.3 and 1.6 times their pay rate.

Then you lose hours again, because not every paid hour is billable. Travel, yard time, toolbox talks and clean-up are all paid but not charged. Once you run both of those through, a good rule of thumb is that a staff member needs to be billed out at roughly 2.5 to 3 times their hourly pay rate for the job to actually make you money.

Charging your team out at cost plus a bit is one of the quietest ways to go broke while looking busy. The Team rates tab works out the real number for each person.

How much tax should I put aside?

The short version: as a sole trader, somewhere between 20 and 30 percent of your profit is a reasonable starting point for income tax, plus whatever GST you've collected minus what you've paid. But a starting point isn't a plan, and the exact number depends on your profit, your other income, and what you've already paid in instalments.

Two rules that will save you a lot of pain. First, the GST you collect was never yours. It's the tax office's money sitting in your account, and spending it is the single most common cause of a business running out of cash. Second, keep tax money in a separate account you don't have a card for. Out of sight, out of reach.

If you're a company, your profit is taxed at the company rate and your own wage is taxed separately in your personal return. If you're a trust, the income generally gets distributed to beneficiaries and taxed in their hands at their own rates, so the number depends on who it goes to. Worth a conversation rather than a guess.

Common pricing mistakes we see

• Pricing off what competitors charge, instead of what your own business costs to run.
• Counting every hour worked as billable, when a third of them aren't.
• Leaving yourself out of the costs, or paying yourself whatever's left at the end.
• Forgetting super, which is a real cost whether you're an employee of your own company or not.
• Building in zero profit, so there's no buffer when a job goes wrong or work goes quiet.
• Setting a rate once and never reviewing it, while wages, insurance and fuel all go up.
• Discounting to win work, then doing more of the work that makes the least money.

Questions people ask us