Bill Rate Calculator

With this bill rate calculator, you can easily calculate the bill rate you should charge your clients based on your employee's salary. It will allow you to understand how much you need to charge your clients in order to reach your profit goals.

This article will help you understand what billing rate is and how to calculate the bill rate. We will also show you its application by demonstrating some examples.

The billing rate is the amount of money per hour that you need to charge your clients. This number is essentially the price of your service.

A couple of factors such as the salary you are paying your employees, their billable hours, and overhead costs are essential when it comes to the bill rate calculation. We will look at them in the next section.

You can understand more on this topic by using our salary calculator and billable hours calculator.

Now that you have understood what the billing rate is, now let's look at how to calculate the hourly billing rate. To help you understand the estimation of the billing rate, let's take Candy, an employee of Alpha Group, as an example:

• Name: Candy
• Annual salary: $90,000
• Capacity: 2,080 hours per year
• Multiplier: 4

You can calculate the bill rate in four steps:

1. Determine your annual salary

   The first step is to know your employee's annual salary. In this example, Candy's annual salary is $90,000.

2. Estimate the capacity of your employees

   Next, you will need to understand the capacity of your employees. Capacity is the number of hours your employees can work in a given year. For Candy, her capacity is 2,080 hours per year.

3. Estimate the multiplier

   Now, you will need to estimate the multiplier for your business. The multiplier is in place to ensure that your bill rate is enough to cover the overheads and other costs of your business so that you can hit your profit target.

   Most of the time, a multiplier of 4 is enough to serve the purpose. If you think your business has a higher cost structure, you might want to go higher. Otherwise, you might be able to go lower to attract more clients by charging a lower bill rate.

   For Alpha group, its multiplier is 4.

4. Apply the bill rate formula:

   The last step is to calculate the bill rate using the formula below:

   bill rate = (annual salary / capacity) × multiplier

   Hence, the bill rate Alpha Group should charge it clients for Candy's services is ($90,000 / 2,080) × 4 = $173.08 per hour.

If you want to avoid the above steps, use our billing rate vs. salary calculator to find the bill rate from the annual salary in no time.

Understanding the bill rate calculation is vital for every business. This is because, in order to have a profitable business, you need to understand how much money you need to charge your clients. This is especially true when you need to take into account the salary that you are paying your employees and other costs required to run the business.