How the calculation works
The calculator uses five steps. Each one is a plain formula, so you can check it on paper.
- Fully loaded monthly cost = gross monthly pay + employer costs on top of pay + this person’s share of overhead.
- Cost per paid hour = fully loaded monthly cost ÷ paid hours in the month.
- Billable hours = paid hours × billable utilization.
- Break-even billable rate = fully loaded monthly cost ÷ billable hours.
- Target billable rate = break-even rate ÷ (1 − target margin).
The 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.
Why utilization moves the rate more than pay
The same person, with the same pay and overhead, needs a very different rate depending on how much of the month is billable:
| 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 approved hours, is closer to 60%. The article on utilization rate explains how to measure it without fooling yourself.
What to put into overhead
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.
- Rent, utilities and the office itself.
- Software and subscriptions, equipment and its replacement.
- People who do not bill: management time, finance, administration, sales and account management that is not charged to a client.
- Insurance, accounting and legal fees, bank charges.
- Recruitment, training and conferences.
If 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.
From one person to a team rate
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.
The 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.
Use the rate on real projects
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 approved hours with the estimate every week, so that scope creep shows up while it can still be priced.
PLYNTUM holds a loaded hourly cost for each person and sets approved 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.