How the Cost Per Billable Hour calculator works

capacity hours = hours per day x (working days - vacation - public holidays - sick days)

8 x (260 - 15 - 10 - 5) = 1,840 hours. This is what the person is paid for and present for. It is already well short of 2,080.

billable hours = capacity hours x expected utilization

1,840 x 70% = 1,288 hours. Utilization is the share of paid hours charged to client work. Use timesheet data where you have it.

employer tax = statutory country default on salary, or salary x your own percentage

United States, 2026: 6.2% of salary up to $184,500 + 1.45% of all salary + 0.6% of the first $7,000. On $100,000: $6,200 + $1,450 + $42 = $7,692, an effective 7.69%. The full table of defaults and sources is below.

loaded cost = salary + employer tax + benefits

$100,000 + $7,692 + $8,000 = $115,692.

overhead per billable hour = firm overhead / total billable hours of the firm
overhead share (per person) = overhead per billable hour x that person's billable hours

$40,000 / 1,288 = $31.06 per billable hour. With one person in the firm the whole $40,000 lands on them. In a real firm, every role carries the same overhead per billable hour, so a role with low utilization carries less overhead in total and more per hour it can invoice. Allocating by headcount instead would hide exactly the effect the tool exists to show.

fully loaded cost = loaded cost + overhead share

$115,692 + $40,000 = $155,692.

salary-only (naive)        = salary / nominal hours
fully loaded per paid hour = fully loaded cost / capacity hours
cost per billable hour     = fully loaded cost / billable hours

$100,000 / 2,080 = $48.08; $155,692 / 1,840 = $84.62; $155,692 / 1,288 = $120.88. The naive figure understates the true hourly cost by 151%.

break-even rate = cost per billable hour
target rate     = cost per billable hour / (1 - target margin)

Break-even is $120.88. At a 30% target margin, $120.88 / (1 - 0.3) = $172.68. Margin here is gross margin on the hour: revenue minus fully loaded cost, over revenue.

direct labour rate = salary / capacity hours
net multiplier     = bill rate / direct labour rate
firm net multiplier = revenue at target rates / direct labour on billable hours
break-even multiplier = total cost / direct labour on billable hours

$100,000 / 1,840 = $54.35 of salary per paid hour. $172.68 / $54.35 = 3.18x. The break-even multiplier is 2.22x. Direct labour follows the definition used in architecture and engineering firm benchmarking: the raw salary cost of hours charged to projects, before tax, benefits and overhead.

total cost              = sum over roles of (fully loaded cost x headcount)  [= salaries + tax + benefits + overhead]
total billable hours    = sum over roles of (billable hours x headcount)
blended cost / bill. h  = total cost / total billable hours
revenue at target rates = sum over roles of (target rate x billable hours x headcount)
gross profit            = revenue at target rates - total cost

Everything is weighted by headcount, so a role with five people counts five times. Revenue at target rates always gives back exactly the target margin; that is a check that the arithmetic is consistent, not a forecast.

shifted utilization = utilization + shift (same shift for every role, clamped to 1% to 100%)
revenue'            = sum of (original target rate x shifted billable hours x headcount)
margin'             = (revenue' - total cost) / revenue'

Bill rates are held at the base case. Costs are held fixed, because salaries, tax, benefits and overhead do not fall when utilization does. In the example, a five-point drop to 65% takes margin from 30% to 24.6%.