What your billed labor rate should really be

I spent twenty years in dealership service, and some of it running my own shop. The single most useful thing that environment teaches you is the gap between what a technician is paid and what the customer is billed — and why that gap is not greed. A dealership that bills $180 an hour is not paying the tech $180. It is not paying him half of that. And the shop is not getting rich on the difference.

Most trade contractors I talk to have never built that number deliberately. They looked at what the guy down the road charges, subtracted a bit to win work, and have been living with the consequences ever since.

Layer one: the wage

Start with what you actually pay, not what you wish you paid. If you are pricing a crew, use the crew's blended wage, not the cheapest person on it.

For reference, here is what the Bureau of Labor Statistics reported for the Buffalo-Cheektowaga metro area in its May 2025 Occupational Employment and Wage Statistics, alongside the national median:

Two things worth noticing. Buffalo pays above the national median in every one of these trades — if you have been benchmarking against national "average" numbers you have been underpricing. And the spread from the 10th to the 90th percentile is enormous. A roofer at $23 and a roofer at $37 are both normal; they are not the same hire and should not carry the same rate.

Layer two: burden

Nobody works for their wage alone. On top of it sit the employer's share of FICA, federal and state unemployment, workers' compensation, general liability, any health coverage or retirement match, paid time off, and — in the trades — a truck, fuel, insurance on that truck, and the tools in the back of it.

The BLS Employer Costs for Employee Compensation series measures the first part directly. In its March 2026 release, for the construction industry, total compensation averaged $51.23 per hour against $35.54 in wages — benefits of $15.69, or about 44% on top of the wage.

That is the floor, not the ceiling, and here is why. That figure blends an all-industry-average workers' compensation cost. Workers' comp in the trades is not average. Published New York rate ranges put lawn service and maintenance around $5.33 to $10.39 per $100 of payroll, and roofing contractors at $19.56 to $38.14 — a rate that can add a fifth to nearly two-fifths of payroll on its own. ECEC also does not include the truck, the trailer, the mower deck or the general liability policy.

So a defensible burden multiplier, applied to the raw wage:

• Landscape and grounds work: 1.45× to 1.65×
• Roofing: 1.65× to 2.00×

Anything under 1.4× is almost certainly missing something. Note these are my synthesis of the BLS data plus published comp rates — not a figure BLS publishes — and the comp figures come from a broker's rate table rather than NYCIRB's filings, so confirm your own class code and experience mod with your carrier before you build a rate on them.

Layer three: the hours you can actually bill

This is the layer everybody skips, and it is the one that does the most damage.

You pay for eight hours. You do not bill eight hours. You bill the time on the job — not the drive there, not loading the trailer, not the dump run, not the twenty minutes at the supply house, not the estimate you drove across town to write for a job you did not get, not the rain day.

Every hour you pay for that you cannot bill has to be recovered inside the hours you can. If your crew bills 6 hours out of every 8 paid, that is a 75% billable ratio, and your true cost per billable hour is the burdened cost divided by 0.75 — a 33% increase before a dollar of overhead or profit.

Most small trade contractors land between 60% and 70% once travel, loading and weather are honestly counted. If you have never measured it, measure it for two weeks before you touch your rate. It is usually the single largest correction in the whole exercise.

Layer four: overhead and profit

Overhead is everything that does not go out on the truck: the shop or yard, the phone, the software, the accountant, the insurance that is not on a specific job, the estimator's time, the advertising, and your own hours in the office at night.

Profit is separate from your pay. If you work in the field, your labor is a cost. Profit is the return on the business and on the risk of owning it. A company that pays its owner and returns nothing has no cushion for a bad winter, no way to replace a truck, and nothing to sell at the end.

The NAHB Cost of Doing Business Study, published April 2026 on 2024 data, found residential remodelers running a 29.9% gross margin, 23.6% of revenue in operating expenses, and 6.3% net profit. That is what the industry actually achieves.

The "10 and 10" convention — 10% overhead, 10% profit — comes out of insurance restoration estimating and is widely argued to be below real cost. Restoration & Remediation reported a modeled $5 million restoration firm carrying overhead around 43% of gross sales, and noted carriers allowing up to 19 and 19 in some markets. Take 10 and 10 as a floor imposed by an adjuster, not a target.

Putting it together

A two-person landscape crew in Erie County: one at the Buffalo median of $20.08, one experienced hand at $26. Blended wage $23.04 per crew-hour, per person.

That is $77 per person-hour billed, from people paid $20 and $26. If that number makes you uncomfortable, the discomfort is the point — it is the number the arithmetic produces, and the reason so many trade businesses fail in year three is that they charged $95 for that crew and could not work out where the money went.

Note the last step: overhead and profit are taken as a share of revenue, not marked up on cost. Dividing by (1 − overhead% − profit%) is the correct move. Multiplying cost by 1.32 gets you a smaller number and quietly eats your margin.

Why this beats a per-unit price

Most contractors price by the unit — so much per yard of mulch, so much a square of shingles. It works until something moves, and then every single price on the sheet is wrong at once.

Hours-times-rate has one variable that carries all the regional and seasonal movement: the rate. When your comp renewal lands or fuel jumps, you change one number and the entire price list is correct again. When a job is on a slope, or a hundred feet from the truck, or gated, you change the hours for that job and nothing else. It also gives you something to show a customer who asks why their driveway costs more than their neighbor's — because yours took two more hours, and here they are.

That is the model underneath AerialQuote: every job carries a production rate in crew-hours per unit, and the price is hours × rate + material + fees + overhead and profit. Pros can edit every one of those inputs.

Frequently asked

Should I tell the customer my hourly rate? Not usually, and not because it is shameful — because a rate without a production figure invites the wrong argument. "Six hours at $154" is a conversation about whether it takes six hours, which you can win. "$154 an hour" is a conversation about your rate, which you cannot.

What if my competition charges half? Some of them are wrong, and will be gone in two years. Some of them are running a genuinely lower cost structure — no employees, no comp, a paid-off truck. Know which one you are looking at before you match them.

Do I use one rate or a rate per trade? Per trade, if you do more than one. Roofing carries comp costs landscaping does not, and blending them means your mulch work subsidizes your roofs.

Run your own numbers

Switch the estimator to Pro and price a job at your own billed rate — production rate, marked-up material, disposal, equipment and overhead-and-profit percentage. It saves per job type in your browser. There is also a checkbox to see exactly what a homeowner would be shown for the same job, which is worth looking at before your next estimate conversation.

Sources: BLS Occupational Employment and Wage Statistics, May 2025 via O*NET local wage data for the Buffalo-Cheektowaga NY MSA · BLS Employer Costs for Employee Compensation, March 2026 · BLS Buffalo occupational wage release · NAHB Cost of Doing Business Study, April 2026 · New York workers' compensation rate ranges via a broker rate table, WorkersCompensationShop — verify against NYCIRB filings · Restoration & Remediation on the "10 and 10" convention

Educational use. This is not accounting or tax advice, and burden rates depend on your own carrier, class code and experience modification. Confirm with your accountant and your insurance agent before repricing.