How to price a job: work out your real charge-out rate

Your charge-out rate is the hourly figure you bill customers for labour. It isn't your wage. It has to pay your wage, your super, the ute, the insurance, the phone, the tools, the accountant and the hours you spend quoting and driving, and still leave some profit. Most tradies who are busy but always short of money have a charge-out rate that only covers the first item on that list.

This guide shows you how to price a job from the ground up: work out what the business costs to run, how many hours you can actually bill, and what each of those hours needs to earn.

The formula

Everything below comes back to one line:

Charge-out rate = (your pay + your overheads + profit) ÷ billable hours in a year

Each part is easy to get wrong in a way that makes your rate too low. So take them one at a time.

Step 1: what you need to pay yourself

Start with the wage you would want if you worked for someone else doing the same job, then add what an employer would pay on top.

• Your wage. Be honest. If you could earn $90,000 working for a bigger company, use that.
• Super. The superannuation guarantee is 12 percent of ordinary earnings from 1 July 2025. As a sole trader you aren't forced to pay yourself super, but your retirement still needs it.
• Leave. You'll take holidays and get sick. Those weeks are covered by the year's figure, as long as your billable hours (step 3) leave them out.

For the worked example we'll use a wage of $90,000 plus 12 percent super, which is $100,800.

Step 2: what the business costs to run

Overheads are everything you pay whether or not you're on a job. Go through last year's bank statements rather than guessing. A sole trader's list usually looks like this:

Your figures will be different. The point is to have real ones. If you have a workshop, a storage unit or a second vehicle, they go in here too.

Step 3: count your billable hours properly

This is where most rates go wrong. There are 52 weeks in a year, but you won't bill in all of them, and you won't bill every hour you work.

Start with the weeks you actually work:

• 52 weeks in the year
• minus 4 weeks of holidays
• minus 2 weeks of public holidays
• minus 2 weeks for sick days, rain and training

That leaves 44 working weeks. At 38 hours a week, that's 1,672 hours at work.

Now the part that hurts. Not every one of those hours can go on an invoice. Quoting, supplier runs, driving between jobs, chasing payments, fixing your own gear and doing the books all come out of the same week. A realistic share for a busy sole trader is around 70 percent billable. That gives roughly 1,170 billable hours a year.

Step 4: add profit

Profit isn't greed. It's what pays for a new ute when the old one dies, a slow month, a bad debt, or the deposit on the first employee. Ten percent on top of your costs is a sensible floor.

Putting it together

So a sole trader with these costs needs to charge about $129 an hour before GST just to hit a fair wage and a small profit. If that feels high, look at what happens when the billable share changes:

Billable hours move your rate more than anything else in the sum. Every hour you win back from admin, travel and quoting is an hour you can bill, which is why cutting the office work is a pricing decision as much as a lifestyle one.

Markup versus margin

Materials are priced differently from labour. You buy them and sell them on with a markup. The trap is mixing up markup and margin, which aren't the same number.

• Markup is what you add on top of cost. Buy at $100, sell at $125, and your markup is 25 percent.
• Margin is the share of the selling price that's profit. At $125, the $25 is 20 percent of the sale, so your margin is 20 percent.

If your accountant tells you the business needs a 20 percent margin on materials, you need a 25 percent markup to get it.

Hourly rate or fixed price

Once you know your rate, you can choose how to show it to the customer.

Charge by the hour when you can't see the whole job: fault finding, old wiring, a leak you haven't traced. Tell the customer the rate and roughly how long it might take.

Give a fixed price when the job is well defined. Work it out from your rate and your materials, then present one number. Customers prefer it, and if you're quick, you keep the benefit. The step by step quoting guide shows how to lay out a fixed price line by line.

Check it against the market

Your rate comes from your costs, but customers compare it with what others charge. If your number sits well above the local market, look at your billable share and your overheads before you drop the price. If it sits below, you're probably working for less than you think. For one trade's numbers, see what electricians charge an hour in Australia.

When you take on staff

An employee costs much more than their hourly wage. Add super, workers compensation insurance, paid leave, tools, a vehicle if they have one, and the hours they're paid but not billing. Work out their charge-out rate with the same formula, using their real cost and their real billable hours. A rate that works for you on the tools alone often loses money once you're paying someone else to do the work.

Review it every year

Fuel, insurance, materials and wages all go up. Redo the sum every July when the new financial year starts and the super rate or award wages change. A rate that was right two years ago is probably costing you now.

The short version

Add up what you need to pay yourself, including super. Add every overhead from real bank statements. Add 10 percent profit. Divide by the hours you can actually bill, which is far fewer than the hours you work. Use a markup on materials that gives you the margin you need. Then redo it every year.