Electrical Labor Rate Calculator

The notion of overhead includes every cost related to your business that is separate from the amount of jobs you run. For an electrical business, this typically includes:

• Vehicle costs (trucks, fuel, maintenance)
• Tools and testing equipment (meters, thermal cameras, wire pullers)
• Insurance (general liability, workers' comp, bonding)
• Licensing and continuing education and training for licensed electricians
• Software (scheduling, invoicing, pricebook)
• Rent, utilities, and office staff, if applicable, etc.

All these expenses add up at the end of the year in the form of overhead costs. This figure is divided across your total billable hours in the break-even formula.

Here's a clear example. Say your business's annual overhead is $70,000, but you forget to include $10,000 in insurance and testing equipment costs, so you enter $60,000 instead. Considering 5,000 total annual billable hours:

• Correct overhead ($70,000): overhead adds $14.00/hr to your break-even rate ($70,000 ÷ 5,000).
• Overhead missing $10,000 ($60,000 entered): overhead adds only $12.00/hr.

That's only a $2/hr difference on paper. Multiply that across 5,000 billable hours, though, and you get $10,000 a year that the business is failing to charge for.

This example shows that even seemingly small financial oversights can have serious long-term costs.

Here's how you can calculate your hourly labor rate for a 4-electrician residential and light commercial crew:

• Average wage: $34/hr
• Payroll tax and benefits load: 18%
• Annual overhead: $70,000
• Owner salary: $95,000
• Billable hours: 60% of a 2,080-hour year (1,248 hrs per electrician)
• Target margin: 18%

Step 1 — Loaded wage: $34 × 1.18 = $40.12/hr

Step 2 — Total paid hours: 2,080 × 4 electricians = 8,320 hrs/year

Step 3 — Billable hours: 8,320 × 0.60 = 4,992 hrs/year

Step 4 — Payroll cost: 8,320 × $40.12 = $333,798

Step 5 — Total cost base: $333,798 + $70,000 + $95,000 = $498,798

Step 6 — Break-even rate: $498,798 ÷ 4,992 = $99.92/hr

Step 7 — Target rate: $99.92 ÷ 0.82 = $121.85/hr

Note that payroll is paid on every hour worked, not only on the billable ones. Drive time, training and callbacks still draw a wage, which is why step 4 uses all 8,320 paid hours while step 6 divides by the 4,992 you can actually invoice.

Your specific numbers will be different, but the equation will remain the same.

There's no single correct labor rate across the industry. Instead, the right number depends on your specific costs and overhead number, rather than a national average.

As a general idea, though, a good gross profit margin range for the electrical trade is 52-65% with a net profit margin between 12% and 20%. If you fall below that, you need to get back to the drawing board.