How much should a tradie charge per hour?

The single biggest mistake new tradies make is setting their rate by looking at what they earned as an employee — or what a mate charges — and tacking a bit on top. That number is almost always too low, because a charge-out rate has to do far more than a wage does.

What your rate actually has to cover

Your hourly rate isn't your pay. It's the number that keeps the whole business afloat. It has to cover three things:

• The pay you want to take home — what you actually want to earn for yourself.
• Your business overheads — every cost of running the business (more on these below).
• A profit margin — a buffer so the business itself makes money, not just breaks even.

…and it has to recover all of that from the limited number of hours you can actually bill. That last part is where most people come unstuck.

Billable hours are not the same as hours worked

You might work a 40-hour week, but you can't send an invoice for all 40. Quoting, driving between jobs, picking up materials, chasing payments and doing the books are all real work — and none of it is chargeable. For most sole traders, only around 30 of every 40 hours are billable.

Then knock out holidays, public holidays and the odd sick day, and you're realistically working around 46 weeks a year, not 52.

The formula

It's simpler than it sounds:

1. Add the pay you want to your yearly business costs.
2. Add a profit margin (say 10%).
3. Divide by your billable hours per year.

That gives your minimum charge-out rate, excluding GST.

A worked example

Say you want to take home $70,000, your business costs run to $20,000 a year, and you add a 10% margin:

Take-home pay you want	$70,000
Business costs (overheads)	$20,000
Subtotal	$90,000
+ 10% profit margin	$99,000
÷ billable hours (30 × 46)	1,380
Charge-out rate (excl. GST)	$72 / hour

Add 15% GST and you'd quote around $83/hour including GST — but always advertise and quote the ex-GST figure.

Overheads people forget to include

When you add up your business costs, don't leave these out — they're the difference between a rate that works and one that quietly bleeds you:

• Vehicle — fuel, servicing, tyres, RUC, depreciation
• Tools and equipment (and replacing them)
• Insurance — public liability, tools, income protection
• ACC levies
• Phone, internet and software (accounting, job management)
• Accountant or bookkeeper
• Advertising and your website
• Training, licences and registrations

Don't forget GST

If you're GST-registered, your rate is quoted excluding GST, and you add 15% on top. In New Zealand you must register for GST once your turnover passes $60,000 in any 12-month period. Not sure if that's you yet? Read our guide on whether you need to register for GST.

Review it every year

Your costs creep up — insurance, fuel, a new ute. Re-run the numbers at least once a year, and any time a big cost changes. A rate you set two years ago is probably losing you money now.

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