The calculator uses five steps. Each one is a plain formula, so you can check it on paper.
\nThe default figures are an example, not a benchmark. Gross pay of 3,000, employer costs of 10% (300) and overhead of 800 give a fully loaded cost of 4,100 a month. Over 160 paid hours, one hour costs the company 25.63. At 70% utilization the person has 112 billable hours, so every billable hour has to bring in 36.61 just to cover the cost. With a 20% margin, the rate to quote is 45.76.
"},{"heading":"Why utilization moves the rate more than pay","html":"The same person, with the same pay and overhead, needs a very different rate depending on how much of the month is billable:
\n| Billable utilization | Billable hours of 160 | Break-even rate |
|---|---|---|
| 60% | 96 | 42.71 |
| 70% | 112 | 36.61 |
| 80% | 128 | 32.03 |
Ten points of utilization change the break-even rate by more than a 10% pay rise does. That is why a rate built on “we bill about 80%” goes wrong when the real figure, taken from logged hours, is closer to 60%. The article on utilization rate explains how to measure it without fooling yourself.
"},{"heading":"What to put into overhead","html":"Overhead is everything the company pays for that no client pays for directly. Add it up for a month and divide it by the number of people who do billable work.
\nIf you are an owner who also delivers work, count the part of your time spent running the company as overhead and the delivery part as a person in the calculator. Otherwise the rate hides your own salary.
"},{"heading":"From one person to a team rate","html":"Run the calculator for each role, not for an average person. A senior designer and a junior designer cost different amounts per hour, and a project staffed with more senior hours needs a higher price. To get a blended rate for a team, add up the fully loaded monthly cost of everyone on the team and divide it by their total billable hours.
\nThe number is a floor, not a price. Market rates, the value of the work and the pricing model decide what you charge. What this calculator tells you is the rate below which every sold hour loses money. The article what an hour of your team actually costs walks through the same logic with more detail.
"},{"heading":"Use the rate on real projects","html":"A rate is only as good as the hours behind it. On a fixed-fee project, estimate the hours, multiply by the target rate, and compare the result with the fee before you accept the work. During the project, record time against tasks and compare logged hours with the estimate every week, so that scope creep shows up while it can still be priced.
\nPLYNTUM holds a loaded hourly cost for each person and sets logged hours and direct expenses against the project value, so project profitability is a report rather than a spreadsheet. It does not calculate payroll or taxes; employer contributions differ by country, so use the figures that apply to you.
Once you have a rate, the profit margin calculator shows what margin a quote leaves and how many hours the project can take before the margin falls below your target.
"}]},"keyFacts":[["What it calculates","Cost per paid hour, the break-even billable rate and a target rate with your margin."],["What you enter","Monthly pay, employer costs, overhead per person, paid hours, billable utilization and target margin."],["Currency","Any: enter the amounts in the currency you pay salaries in."],["Privacy","The calculation runs in your browser; nothing you type is sent or stored."]],"faq":[["How do I calculate an hourly rate?","Add pay, employer costs and a share of overhead to get the fully loaded monthly cost, divide it by the billable hours in the month to get the break-even rate, then divide by one minus your target margin."],["What billable utilization should I assume?","Use your own approved hours rather than a rule of thumb. People who only deliver can be planned higher than people who also sell, manage or train, so set the figure per role."],["What is the difference between the break-even rate and the target rate?","The break-even rate only covers the cost of the hour. The target rate adds the margin you want to keep, so it is the lowest rate worth quoting."],["Should an owner’s salary be included?","Yes. Count the time spent running the company as overhead and the time spent delivering client work as a person in the calculator; otherwise the rate hides the owner’s pay."]]}