1. What is QuickBooks Hourly Cost Rate?

The QuickBooks Hourly Cost Rate calculates the true cost of an employee's time by considering both their salary and additional employment costs (burden) divided by their billable hours. This helps businesses accurately price services and understand labor costs.

2. How Does the Calculator Work?

The calculator uses the following equation:

Where:

• \( Salary \) — Annual employee salary in USD
• \( Burden \) — Additional employment costs (benefits, taxes, etc.) in USD
• \( Billable\ Hours \) — Total hours available for client work per year

Explanation: The equation calculates the true hourly cost of an employee by accounting for both direct compensation and indirect costs.

3. Importance of Hourly Cost Rate

Details: Understanding your true hourly labor costs is essential for accurate job costing, pricing decisions, profitability analysis, and financial planning in service-based businesses.

4. Using the Calculator

Tips: Enter salary and burden in USD, billable hours in hours. All values must be positive numbers. Typical billable hours range from 1,000-2,000 per year depending on vacation and non-billable time.

5. Frequently Asked Questions (FAQ)

Q1: What should be included in "Burden"?
A: Include payroll taxes, benefits (health insurance, retirement), workers comp, and any other employment-related costs beyond base salary.

Q2: How do I estimate billable hours?
A: Start with 2,080 hours/year (40 hrs × 52 weeks), then subtract vacation, holidays, sick time, training, and administrative hours.

Q3: Should I use this for pricing services?
A: This calculates your cost - you'll typically want to add a markup (often 2-3×) to determine your billing rate to clients.

Q4: Does this work for contractors?
A: For 1099 contractors, you might only need their hourly rate as they typically cover their own "burden" costs.

Q5: How often should I recalculate?
A: Recalculate whenever salaries change, benefits costs are adjusted, or billable hour expectations change significantly.