Articles

What your hourly rate actually needs to be

25 August 2026 · 7 min read · Gnarly by Nature Pty Ltd

Almost everybody sets their rate the same way. You find out what someone else in your trade charges, you go a bit under it to win work, and that becomes your number for the next four years.

The problem is not that the number is too low. Sometimes it is fine. The problem is that you do not know whether it is too low, so you cannot tell whether a quiet month is bad luck or a pricing problem you have been carrying since you started.

The mistake: paid hours are not worked hours

Here is where it goes wrong. Somebody works out they want to earn, say, $120,000 a year. They divide by 52 weeks and 38 hours and get about $61 an hour. They add a bit for costs, charge $95, and feel like they have been careful.

They have just made the most expensive mistake in the trade, which is assuming every hour they work is an hour somebody pays for.

Count the hours in your week that nobody pays for. Driving between jobs. Picking up materials. Quoting work you do not win. Invoicing on a Sunday night. Chasing money. Talking to a supplier about a delivery that did not turn up. Ringing a customer back. None of that is on an invoice, and all of it is your week.

Do this instead

Four numbers. Work them out honestly, once, and it will change how you quote.

1. What you need the business to earn

Not what you want to take home. Add up what you personally need, then the things the business pays for whether or not you work: the ute and its running costs, insurance, tools and replacements, phone, accounting, licences and registrations, software. Then add something for tax and something for superannuation. If you are unsure of the current super rate or your tax position, that is a question for your accountant, not an article.

2. How many weeks you actually work

Fifty two, minus holidays, minus public holidays, minus the week you get the flu, minus the days rained out if you are outside. Most people land between 44 and 46. Use the real number.

3. How many hours a week are billable

This is the number that matters and the one nobody measures. Take a normal week and count only the hours you could put on an invoice with a straight face. For a lot of small operators working on their own, a 50 hour week contains something like 30 billable hours. For a one man band doing many small jobs, with all the driving, it can be well under that.

Do not guess this. Track it for two weeks. It is almost always worse than people expect, and that gap is the whole article.

4. Divide

Your rate is the first number divided by weeks times billable hours.

$180,000 needed ÷ (45 weeks × 30 billable hours) = $133 an hour

If you have been charging $95 because that is what the bloke down the road charges, you now know something important: either he has more billable hours than you, or he has lower costs, or he is quietly going backwards. All three happen.

What to do with the answer

You do not have to put your rate up to the number tomorrow. But you now know which direction you are wrong in, and by how much, and that changes decisions.

• Raise the billable hours instead. Often easier than raising the rate. Every hour of quoting, invoicing and chasing you get back is an hour that can be sold. Going from 30 to 34 billable hours in the same week is a 13 per cent pay rise with no awkward conversation.
• Charge for the trips you currently do not. A measure, a site visit, a quote that takes a morning. Somebody is paying for those and at the moment it is you.
• Put the minimum up. The small jobs are usually the ones losing money, because the unpaid hours around them are the same size as the ones around a big job.

The bit people resist

Most people who do this arithmetic do not like the answer, and decide the market will not pay it. Sometimes that is true. But it is worth being precise about what it means: if the market genuinely will not pay a rate that covers your costs and a fair wage, the problem is not your pricing. It is the mix of work you are taking, or the area, or the type of customer. That is a different problem and it has different fixes, but you cannot see it at all until you have done the sums.

This is arithmetic, not financial advice. Your tax, your superannuation obligations and your business structure are for you and your accountant.

Drizzy in your trade

He works the same whatever you do, but the words change. Pick your trade and see what it looks like.

More

What your first hire actually costs

The wage is somewhere between half and two thirds of it. Here is the rest, and the number of billable hours they have to hit before they pay for themselves.

Your busiest month was probably not your best

Revenue tells you how much came in. It does not tell you which work was worth doing. Here is how to find the jobs quietly costing you money.

Getting paid without chasing

Chasing money is a symptom. The fix is almost always earlier in the job than the invoice — in what you wrote down, and when you sent it.