Ask most tradespeople how they calculate labour on a quote and you'll get a fairly vague answer: "I know how long it'll take, so I just times it by my day rate." That might work on simple jobs you've done a hundred times, but on anything complex, it's a recipe for undercharging. Here's a more rigorous approach.
Start with Hours, Not Days
Working in days creates rounding errors. A "two-day job" gets treated as a fixed cost, but two long days versus two short days can be a three-hour difference. Price everything in hours. It forces you to think concretely about what each phase of the work actually involves: prep, main task, clean-up, client walk-around.
Build a simple estimate for each phase of the job. For example: site survey (1 hr), first fix (6 hrs), second fix (4 hrs), snagging (1 hr). Total: 12 hours. That's your base.
Calculate Your Fully-Loaded Labour Rate
Your labour rate is not what you earn per hour — it's what it costs to put an employee (or yourself) on-site per hour, including all on-costs. For an employee, this means salary divided by billable hours, plus employer's NI (13.8% above the secondary threshold), pension contributions (minimum 3% employer), and any holiday pay or sick pay entitlements.
A rough rule of thumb: add 25–30% on top of gross wage to get your true employment cost. So an employee on £20/hour actually costs you around £25–£26/hour before profit.
Account for Non-Billable Time
Not every hour your staff work is chargeable to a client. Travelling between jobs, loading and unloading the van, attending training, team meetings, and site surveys all consume time that needs to be recovered somewhere. If you're paying a team of two for 40 hours a week but only billing 30 of those hours, your effective rate needs to be higher to cover the gap.
A simple way to handle this: calculate what percentage of your team's time is typically non-billable (often 20–30% for smaller outfits), then divide your total weekly wage cost by billable hours only. This gives you the true hourly cost you need to recover per billed hour.
Add a Labour Contingency
Even the most experienced estimators get labour hours wrong on occasion. A difficult access situation, a job that uncovers unexpected problems, a new team member who needs guidance — all of these extend labour beyond your initial estimate. Add 10% to your estimated labour hours on any job that isn't completely routine. On complex commercial work, go up to 15%.
This isn't padding the quote for profit — it's accounting for the realistic variability in how long work takes in the real world.
Labour is the hardest cost to recover after the fact. Once you've committed to a fixed price, every extra hour you spend on-site is coming out of your margin. Price it properly upfront and the job has a chance of making the profit you intended.
