Shop Labor Rate Calculator
How much should you charge per hour for your shop to actually make money? Start from your real overhead and your truly billable hours: the calculator gives you your cost per billable hour and the labor rate to charge for your target margin.
Your monthly costs
Overhead: rent, utilities, insurance, tools, software, accounting, advertising… Payroll fully loaded: gross wages + payroll taxes, workers' comp and benefits (typically 1.2-1.4 × wages), including your own pay.
Your billable hours
Estimates, customer service, cleanup, parts ordering, training… are never billed: in most shops, 70 to 80% of clocked hours actually get sold.
Enter at least one technician and some clocked hours to get a result.
How to Calculate Your Labor Rate
The principle takes three steps: know what your shop costs every month, know how many hours you can actually sell, then set a price that covers both with a margin:
Billable hours = technicians × weekly hours × 4.33 × billing efficiency
Cost per hour = (overhead + fully loaded payroll) ÷ billable hours
Labor rate = cost per hour × (1 + target margin)
Example: $6,000 overhead, $16,000 loaded payroll, 2 techs at 40 h with 75% billing efficiency → 260 billable hours a month, cost per hour $84.68. With a 20% margin, labor rate to charge: $101.62.
Below your cost per hour, every hour you sell loses money — even with a full schedule. Check that before comparing yourself to the shop across town. Note: whether sales tax applies to labor depends on your state — the rates above are pre-tax.
Mistakes That Skew the Numbers
- Using bare wages: payroll taxes, workers' comp and benefits add 20-40% on top — that's what actually leaves your bank account;
- Leaving out your own pay: if the math only works because you don't pay yourself, the rate is wrong;
- Dividing by 100% of clocked hours: nobody bills 40 hours out of 40 — plan on 70-80%;
- Freezing the rate for years: rent, parts, utilities and wages all move; recalculate at least once a year;
- Copying the shop next door: their overhead is not yours.
This information is provided as guidance only and is not a substitute for advice from your accountant.
Frequently Asked Questions
What is the average labor rate in the US?
As a rough guide, independent shops commonly charge between $75 and $150 per hour; dealerships and specialty shops (diagnostics, European makes, EVs) are often higher. Regional differences are large — your rate must cover your costs first, the averages come second.
Should I have one rate or several?
Many shops run two or three: general repair, advanced diagnostics (electronics, transmissions, hybrid/EV) and bodywork. The cost-per-hour math stays the same — specialty rates simply carry a higher margin, justified by tooling and training.
Is my data sent anywhere?
No. Everything is computed in your browser: nothing is transmitted or stored on a server.
Your rates, inside real invoicing software
In MekaDesk your labor rates are saved once and reused automatically across estimates, repair orders and invoices. $14.99/month, 14-day free trial, no credit card.
Start for free