How this calculator works
Most makers set a labour rate by picking a number that sounds reasonable. The trouble is that not every working hour is billable, and the hours you spend on admin, sourcing, photography and customer email still have to be paid for by the hours that are.
This works backwards from the income you want to the rate your pricing has to carry.
The formula
- Total hours = weeks worked × hours per week
- Billable hours = total hours × billable share
- Fully loaded cost = target pay × (1 + employer costs)
- Required labour rate = fully loaded cost ÷ billable hours
What to watch for
- The gap between the naive rate and the required rate is usually large. At 65% billable and 15% employer costs, a $45,000 target needs a rate roughly 77% higher than dividing pay by total hours would suggest.
- Unbillable time is real work, not slack. Sourcing, photography, listing, customer email and bookkeeping all have to be funded by the hours that reach a product.
- Subtract holiday, sick time and slow weeks from the weeks worked. Costing 52 weeks assumes you never stop, which prices in a level of availability you will not sustain.
- This rate is a cost input for the product calculators, not a price. Margin goes on top of it.
Common mistakes
- Dividing target pay by 52 weeks and 40 hours, which assumes every hour is billable and you never take a day off.
- Leaving employer costs out when pricing an employee, then discovering the true cost is a quarter higher.
- Setting the billable share from what a good week looks like rather than an average one.
- Treating this rate as the price. It is what an hour costs; the margin is separate.
Frequently asked questions
What hourly rate should I charge for handmade work?
Work backwards from the income you need rather than picking a number. Divide your target pay, plus employer costs, by the hours that actually end up inside products you sell. For a $45,000 target at 65% billable, the labour rate your pricing needs is typically in the $28 to $35 range before any profit margin.
What percentage of my hours are billable?
For a solo maker running the whole business, 55% to 70% is realistic once sourcing, photography, listing, customer service, bookkeeping and marketing are counted. If you have never measured it, track a fortnight honestly — most people are surprised how little of the week reaches a product.
Is the labour rate the same as what I charge?
No. The labour rate is a cost that goes into the product calculators alongside materials, machine time and overhead. Your selling price is then solved for a target margin on top of the whole cost stack. Charging your labour rate directly means running the business for exactly no profit.
Should I include employer costs if it is just me?
Yes, in substance. Self-employment taxes, insurance, tools and training are real costs of having a person do the work, whether or not there is a payroll. Fifteen percent is a reasonable starting figure for a sole trader; employing someone is usually 20% to 30%.