Overhead Per Job Hour: How Contractors Should Set the Rate

Revenue minus labor and materials is not net profit. Rent, insurance, software, office pay, truck payments, and tools still have to come out of each ticket. The clean way to do that at the job level is an overhead rate per billable hour — then apply it to onsite plus travel hours on every job.

What counts as overhead

Include monthly costs that do not attach to one customer:

• Shop or office rent and utilities
• Insurance (liability, commercial auto, property)
• Licenses, bonding, and professional fees
• Software, phones, and office admin payroll
• Marketing not charged as a per-lead fee
• Loan payments on trucks and major tools (or a depreciation equivalent)

Leave direct job costs — tech wages, materials, job-specific fees — out of this total. Those hit the job separately.

The simple formula

Overhead $/hour = monthly fixed overhead ÷ expected billable hours that month

Example: $18,000/month overhead and 450 billable tech hours → $40/hour. A job with 2.5 onsite hours and 1.0 travel hour carries $140 of overhead ($40 × 3.5).

Use a realistic billable-hour forecast, not calendar capacity. Non-billable shop time, training, and idle hours shrink the denominator and raise the rate — which is the point. Understating overhead per hour makes every job look healthier than it is.

Apply it to every ticket

On each job, multiply your overhead rate by total labor hours (onsite + travel). Add that to burdened labor, materials, vehicle miles, and any lead fee. What remains after all of those is closer to true net job profit.

Without this step, short travel-heavy calls look fine on paper and still starve the business of cash for rent and trucks.

Refresh the rate when the business changes

• Add a tech or a truck → recalculate hours and fixed costs.
• Seasonality shifts billable hours → use a seasonal average or update monthly.
• Hire office help or buy new software → raise the numerator.

A stale overhead rate is almost as bad as no rate. Revisit it at least quarterly.

Plug the rate into a real job

Once you have a $/hour overhead number, run a recent invoice through the job profitability calculator with that rate applied. Compare net margin with and without overhead — the gap is what your old "gross look" was hiding.