Charge Out Rate Calculator

Costs and Billable Capacity

This charge out rate calculator divides annual costs by billable hours, then allows for your target profit margin. Enter costs and capacity for the same staff group. The result is a planning rate per billable hour, excluding GST.

For an Australian practice, separate annual labour costs from employer on-costs before entering their combined total as annual staff costs. Labour costs include wages and owner remuneration for work delivered by the owner. Employer on-costs include superannuation and other employment costs. Keep allocated overheads in the annual overheads field.

Allocate the share of rent, software subscriptions and insurance that belongs to the staff group you are costing. Count each cost once. Use costs excluding recoverable GST, with any unrecoverable GST included in costs.

For example, the fictional default staff cost of $240,000 could comprise $210,000 in labour and $30,000 in employer on-costs. With $60,000 in allocated overheads, the annual cost basis is $300,000. The hourly charge out rate calculator spreads that total over billable hours before allowing for the target margin.

Paid hours include time you cannot bill. The calculator starts with 52 weeks, subtracts weeks off, then multiplies by weekly hours and full-time staff equivalents. Use the weeks-off field for leave, public holidays and other time away. The utilisation percentage then removes administration, training and other non-billable working time.

In the fictional default example, three staff equivalents work 37.5 hours per week with six weeks off each. That leaves 5,175 working hours. At 70% billable utilisation, the practice has 3,622.5 billable hours. Annual costs of $300,000 need a cost-recovery rate of $82.82 per billable hour.

The government’s hourly pricing guidance includes employment costs when setting a service rate. Replace the example with your own payroll and overhead totals before using the estimate in a quote.

The Rate for a Target Margin

A target margin is the share of revenue left after the entered costs. The target rate is the cost-recovery rate divided by one minus the margin as a decimal. For a 30% margin, divide by 0.70.

Markup uses costs as its denominator. With a $100 cost per hour, adding a 25% markup gives a $125 rate and a 20% margin. To retain a 25% margin, divide $100 by 0.75 to obtain $133.33 per hour. Business Victoria’s margin and markup formulas show the different denominators.

The default example produces a target rate of $118.31 per hour at a 30% margin. It needs about $428,571 of annual revenue to cover $300,000 of costs and leave $128,571 before income tax. The calculator keeps the full rate until displaying each figure.

Enter your bookkeeping tasks and expected hours in the package section. The fictional package allows two hours for bank reconciliation, one for payroll processing and 1.5 for month-end review. Those 4.5 hours produce an estimated $532 fee excluding GST at the default rate.

Use the same period for every task, such as one month. Enter zero hours for an unused task. The package estimate uses the unrounded target rate. Review scope, review time and work outside the package before agreeing a fixed fee.

Compare a Lower Utilisation

Lower utilisation spreads the same annual costs over fewer billable hours. The comparison keeps staff numbers, weeks off and the target margin unchanged. Enter a percentage no higher than the main utilisation.

In the fictional example, a fall from 70% to 60% reduces billable capacity from 3,622.5 to 3,105 hours. The target rate rises from $118.31 to $138.03 per hour to retain the 30% margin. Raising the rate cannot guarantee that clients buy the available hours.

Capacity Before a Quote

Available staff time limits how much work the practice can promise. Compare the package hours with capacity remaining after committed work. Convert recurring packages to an annual total before comparing them with annual billable hours.

The fictional 4.5-hour monthly package uses 54 hours per year. At 70% utilisation, the example capacity accommodates 67 complete packages before other work. At 60%, it accommodates 57. Those counts assume work can be scheduled evenly and the staff have the skills each task needs.

The estimate assumes all billable hours are sold and collected at the calculated rate. Discounts, write-offs and unexpected work reduce the margin. Review actual collected fees and time records after the first jobs, then update costs or utilisation before quoting more work.

Your entries stay on this page. The calculator sends no entered figures to Tax Genie and saves none in browser storage.