Most trade contractors price their labor using an employee’s base hourly wage. But base wage and true cost are two very different numbers. When you factor in payroll taxes, workers’ comp, health benefits, vehicle costs, and tools, a $35/hour technician can actually cost your company closer to $52 an hour before they’ve even stepped foot on a job site. This is the Fully Burdened Labor Rate, and it’s the foundation every accurate bid should be built on.
The math gets more urgent once you account for labor utilization – the reality that technicians aren’t billable for 100% of their paid hours. Between drive time, shop meetings, and PTO, a typical trade business only sees around 65% utilization, which means the true cost to put a technician on a job can climb to $80/hour or more. Bill that tech out at $100/hour, and a business assuming a 60% gross margin is actually operating closer to 20% – with little to nothing left after overhead. Understanding this single number is often the difference between a trade business that scales profitably past $5M and one that quietly runs out of cash while looking “busy” on paper.
