The maths, explained
Rent, office work, software and other indirect costs need a way back into your prices. This model divides annual overhead by the total billable hours of the entered team, then adds the direct hourly labour cost for a basic recovery rate. It is a simple allocation method: businesses with different crews or equipment demands may need separate cost centres.
Overhead per billable hour = annual overhead ÷ (billable employees × billable hours)
A worked example
The worked example below uses the calculator’s initial inputs and the same calculation function as the live interface. Replace example amounts with your own records; changing currency does not convert the numbers. Physical reference dimensions are stored in metric units, and the interface can display their imperial equivalents. Rounded display values may differ slightly from the full precision retained in the calculation.
| Your inputs | Editable example — not a market quote |
|---|---|
| Annual overhead (CAD) | 120,000 |
| Billable employees | 4 |
| Billable hours per employee/year | 1,500 |
| Direct labor cost per billable hour (CAD) | 42 |
| Overhead per billable hour | $20.00 |
| Hourly break-even labor rate | $62.00 |
| Annual billable hours | 6,000 |
Assumptions used
All cost inputs must cover the same period and use one currency. Employer charges and overhead remain business-specific inputs. Defaults are educational scenarios, not market averages. This model does not determine tax obligations or contractual rights. Ratios with a zero denominator are marked as undefined rather than presented as a misleading zero percent.
On your side of the Atlantic
Canadian projects often mix metric drawings with imperial products. Confirm the supplier’s units and the applicable GST, HST or PST treatment for your province.
Common mistakes
Use billable hours rather than all paid hours. Avoid mixing direct materials with fixed overhead or charging the same overhead again as a separate hourly allowance. Revisit utilisation when the workload changes.
Before ordering or tendering, compare at least two scenarios: your base takeoff and a realistic alternative. Keep assumptions with the result so differences are explainable. Save an estimate only on a suitable device. A shared link contains the entered values, so avoid including confidential information. An exported estimate is a snapshot and does not update when a supplier changes a price.
Questions from the jobsite
What does this calculator measure?
What is the first mistake to avoid?
Are the example prices supplier quotes?
Which tax assumptions apply in Canada?
How should I handle waste and contingency?
Can I use the result in a tender or estimate?
Planning estimate only. Not a substitute for a professional quote or local building-code compliance. Verify quantities, tax treatment and contract requirements.
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