How to Calculate Your Fully-Burdened Hourly Rate (HVAC)
How to Calculate Your Fully-Burdened Hourly Rate (HVAC)
Ask ten HVAC contractors what they charge per hour and you will get ten numbers, and most of them are too low. Not because those contractors are bad at the trade, but because they are pricing off the wage they pay a tech instead of what it actually costs to put that tech in front of a customer for an hour. That gap, between the wage and the true cost, is your burden. Miss it and you can be busy all year and still broke.
This is the step-by-step way to calculate your fully-burdened hourly rate: every cost that goes into it, the formula, and a full worked example with real 2026 numbers.
Wage is not your cost
Say you pay a tech $32 an hour. That is not what the hour costs you. On top of the wage you are paying payroll taxes, workers comp, and any benefits. Then there is everything that has to exist for that tech to do the job at all: the truck, the fuel, the insurance, the tools, the software, the phone, the person answering the phone, and the rent on wherever you keep all of it.
And none of that includes profit yet. Your fully-burdened rate has to cover all of it and still leave money on the table, or you are running a very expensive hobby.
The four buckets that make up your rate
Every dollar in your hourly rate comes from one of four buckets:
- Direct labor. The wage itself, plus the labor burden on top of it, payroll taxes, workers comp, benefits, paid time. Realistically this adds 25 to 40 percent on top of the base wage.
- Vehicle and field costs. Truck payment or lease, fuel, insurance, maintenance, GPS, the tools and meters that wear out.
- Overhead. Office or shop rent, software, phones, advertising, dispatch and admin salaries, accounting, licensing, everything that keeps the lights on whether or not a truck rolls.
- Profit. What you intend to keep after all of the above. This is a deliberate number you set, not whatever happens to be left over.
The formula
The mechanics are simple once you have the buckets:
(annual labor cost + annual overhead + desired profit) / annual billable hours = fully-burdened hourly rate
The trap is in the last term. Billable hours are not the same as hours you pay for. A tech on the clock 2,080 hours a year is not selling 2,080 billable hours. Drive time, training, restocking, callbacks, slow days, and vacation all eat into it. Most shops realistically bill 60 to 70 percent of paid hours. Use the real billable number or your rate comes out too low.
A full worked example (2026 numbers)
One tech, realistic numbers for a small shop in 2026.
| Line item | Annual amount |
|---|---|
| Tech base wage ($32/hr x 2,080) | $66,560 |
| Labor burden (32 percent) | $21,300 |
| Truck, fuel, insurance, tools | $24,000 |
| Share of overhead (office, software, admin, advertising) | $48,000 |
| Desired profit | $30,000 |
| Total to recover | $189,860 |
Now the billable hours. Paid 2,080, but only 65 percent are truly billable:
2,080 x 0.65 = 1,352 billable hours
And the rate:
$189,860 / 1,352 = $140 per hour
That is the number. Not the $32 wage, not the $50 some contractors quote because it "feels fair." It costs roughly $140 an hour to send that truck and keep the business healthy. In higher-cost markets or with a senior tech the same math lands at $160 to $180.
Knowing your rate is one thing. Turning it into a price on every repair the customer asks about is another, and it is where the hours disappear. If you would rather not price 200-plus services by hand, a done-for-you HVAC Flat Rate Price Book lets you plug in this rate once and reprices the entire book around it.
Why the number usually feels too high
The first time a contractor runs this math, the result almost always feels too high to charge. That feeling is the exact problem. The number feels high because you have been undercharging, not because the number is wrong. The market did not set your cost to operate, your actual expenses did, and the customer paying less than $140 an hour is being subsidized by your missing profit.
The fix is not to talk yourself down to a comfortable number. It is to build your pricing on the real rate and present it with confidence. A firm flat-rate price built on a $140 rate beats an apologetic hourly quote built on a $90 rate every single time.
Turn the rate into prices
Your fully-burdened rate is the foundation, but customers never buy hours. They buy a fixed price for a fixed job. Once you have your true rate, the next move is converting it into a flat-rate price on every service: labor hours times your rate, plus parts at your markup, equals one clean number per task.
That conversion across every common HVAC service is the real labor. The HVAC Flat Rate Price Book from TradeSystemTemplates has already done it, 220+ HVAC services priced with Good/Better/Best on every line and a built-in calculator: enter the rate you just calculated and your parts markup once, and the whole book reprices itself around your real numbers. It runs in Excel and Google Sheets, prints for the truck binder, and the formulas are unlocked so you can edit and rebrand it.
It is a $79 instant download with lifetime updates, and it turns the rate you just worked out into a confident price on every call.
Got your real rate? Put it to work with the HVAC Flat Rate Price Book on Etsy.