RepairSlip
Free calculator

Shop labor rate calculator

Find the hourly labor rate that covers your rent, payroll and overhead — and leaves the profit you want. Then check your effective labor rate to see what you're really collecting.
Your numbers
Billed hours / month
294
Tech pay + burden
$11,154.08
Labor must cover
$21,654.08
Break-even labor rate
$73.54 /hr
Labor rate for 20% profit
$91.93 /hr

A starting point, not advice. Check it against what your market will pay.

Effective labor rate

What you actually collected per hour last month. If it's far below your posted rate, discounts, comebacks or unbilled diagnosis are eating it.

Effective rate
$132.76
$111.27 per hour paid

How the calculator works

The math is the same one a shop accountant would do:

  1. Billed hours per month = techs × hours paid per week × 4.33 × (billed ÷ paid %).
  2. Labor has to cover = overhead + tech pay (with ~15% payroll burden) − parts gross profit.
  3. Break-even rate = what labor has to cover ÷ billed hours.
  4. Target rate = break-even ÷ (1 − profit %).

The biggest lever is usually not the rate — it's billed hours. Raising techs from 75% to 90% billed has the same effect as a large rate increase, without a single customer noticing.

For a step-by-step walkthrough with an example shop, read how to set your shop labor rate. Parts pricing matters too — set your markup with the parts markup calculator.

Questions

What's the difference between posted and effective labor rate?+

Posted is the rate on your sign. Effective is labor sales divided by hours billed — what you really collected. Discounts, free diagnosis and comebacks pull the effective rate down.

Should I just charge the average labor rate in my area?+

Use local rates as a sanity check, not as your answer. Two shops on the same street can have very different rent, pay and efficiency. Start from your own costs, then see where you land against the market.

How often should I raise my labor rate?+

Review it at least once a year, and whenever rent, wages or insurance jump. Small, regular increases go down easier than one big one.

Doing this every day?

Put your labor rate on every estimate automatically.

RepairSlip keeps every estimate, inspection and invoice in one place, and texts the customer a link to approve. $19 a month for the whole shop.

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