How to Calculate Your Labour Rate as a Contractor: The Burdened Hourly Rate, Worked Through

The wage is the number everyone knows, and it is the wrong number to put on an estimate. A carpenter you pay $32 an hour costs you more than $32 for every hour you pay, and you cannot charge every hour you pay to a client. The labour rate that belongs on the estimate is the cost of one billable hour. Here is how to work it out, line by line, with 2026 Ontario figures you can replace with your own.

The formula

Two things make this different from the wage. The top line adds the costs the law attaches to every dollar of wages. The bottom line divides by the hours you can charge, not the hours you pay. Most contractors who underprice labour get the top line roughly right and the bottom line badly wrong.

Step 1: the hours on payroll

A full-time year is 40 hours × 52 weeks = 2,080 hours. In Ontario, a construction employer can pay vacation and public holiday pay as a percentage on every cheque rather than as paid days off: construction employees are not entitled to public holidays or public holiday pay if they receive at least 7.7 percent of their hourly wages as vacation or holiday pay, or 9.7 percent after five years (ontario.ca, construction employees). The 7.7 percent is the Act's 4 percent vacation pay plus an allowance for the province's nine public holidays.

The example below is paid that way, and assumes the worker takes two weeks of vacation and the nine holidays off, unpaid because the percentage already covers them. So the hours you pay wages for are 2,080 − 80 vacation − 72 holiday = 1,928 hours, and the 7.7 percent goes on top of the wages for those hours.

Step 2: what the law adds to the wage

The 2026 rates, each from its own source:

The WSIB figure is the class rate. Your own rate is adjusted for your claims history and your classification, and WSIB publishes it in your online account, so use that number, not this one. Outside Ontario, swap in your province's workers' compensation rate and its vacation rules; CPP and EI are the same everywhere except Quebec, which has QPP and its own EI rate.

Step 3: the worked example

One carpenter at $32 an hour, under five years with you, paid vacation and holiday pay at 7.7 percent, no benefits plan. The wage is an example, not a survey of what carpenters earn; put in what you pay.

Divide by the 1,928 hours you paid for and the worker costs $37.94 an hour: the statutory costs alone add about 19 percent to the wage. That is the number many contractors stop at. It is still too low, because it assumes every paid hour is charged to a client.

Step 4: divide by billable hours, not paid hours

Not every hour you pay for ends up on an estimate. The morning at the supplier picking up material for three jobs, the afternoon in the shop, the callback on last spring's job, the rain day you paid for anyway, the hour waiting for an inspector who came late: all paid, none of it on a line item. Unless your estimates carry those hours somewhere, the billable hours have to pay for them.

The share is yours to measure. For a month, split each timesheet into hours charged to a specific job and everything else. Suppose it comes out at 80 percent:

So the $32 carpenter costs $47.43 for every hour you can put on an estimate, 1.48 times the wage. Change the billable share and the rate moves a long way: at 90 percent it is $42.16; at 70 percent it is $54.21. That spread is why borrowing someone else's multiplier does not work, and why the timesheet month is worth doing.

Step 5: the labour rate is a cost; markup does the rest

$47.43 is what an hour costs you. It contains no overhead and no profit. Put it on the estimate as the cost of labour, alongside materials and subs at their cost, and apply your markup to the whole job. At a 30 percent markup an hour sells for $61.66, which is a 23.1 percent margin, not 30. Contingency versus markup explains where each one goes, and the markup calculator converts markup to margin with your own numbers.

The two mistakes to avoid: putting overhead into the labour rate and marking up on top, which charges it twice; and putting overhead only into the labour rate, which leaves it unrecovered on a material-heavy kitchen where labour is a small share of the price.

If it is just you: the owner-operator rate

You do not pay yourself vacation pay or EI premiums (EI is optional for the self-employed and does not cover regular layoffs), but you pay both halves of CPP: 11.9 percent of earnings above $3,500, up to a 2026 maximum of $8,460.90 for the base plan (CRA). Start from what you need to earn:

The hours are the hard part. An owner who estimates, sells, buys material, runs the books and answers the phone does not spend 1,928 hours on the tools, and the rate has to be honest about that. Add your own disability or health insurance, and whether WSIB coverage applies to you, before you divide; then markup covers the truck, the insurance and the profit, the same as for a crew.

Check it against the jobs you have finished

A rate is only as good as the hours it is multiplied by. When a job closes, compare the hours you estimated with the hours you paid for, task by task. If the burdened rate is right and the job still lost money on labour, the hours were wrong, not the rate. Estimate versus actual sets up the comparison, and how to estimate a renovation job covers estimating the hours themselves.

Redo the arithmetic every January. CPP, EI and WSIB rates and their ceilings change each year, wages go up, and the billable share drifts as the business grows.

Where Estiquik fits

Once you have the number, save it: on Starter and up, your price list keeps a line such as Carpenter, per hour at $47.43, and it fills into every estimate by name, so the rate you worked out once is the rate on every job instead of the one you remembered on site. Labour lines carry hours as the quantity, the estimate applies your markup and the province's tax, and on Pro job costing sets the hours you estimated against the hours the job actually took.

Questions contractors ask

What is a burdened labour rate?

It is what one billable hour of a worker actually costs you: the wage, plus everything the law and the job add on top of it — vacation and holiday pay, the employer's share of CPP and EI, the workers' compensation premium, and any benefits you pay — divided by the hours you can actually charge to a job rather than the hours you pay for. It is a cost, before overhead and profit.

How much higher than the wage is the burdened rate?

It depends on your province, your WSIB rate and above all on how many paid hours turn into billable ones. In the 2026 Ontario example on this page, the statutory costs alone take a $32 wage to $37.94 per paid hour, and billing 80 percent of the hours paid takes it to $47.43 per billable hour, about 1.48 times the wage. Work it out with your own numbers; a multiplier borrowed from someone else's crew is a guess.

Should overhead go in the labour rate?

Not if you also apply markup. Keep labour at its burdened cost and let markup carry overhead and profit across labour, materials and subs alike. Putting overhead in the labour rate and then marking up on top charges it twice; putting it in the labour rate and not marking up materials leaves it unrecovered on material-heavy jobs.

What percentage of hours are billable for a renovation crew?

Nobody can tell you that number for your crew, and published averages vary too much to be useful. Measure it: for a month, split each worker's timesheet into hours charged to a job and everything else — shop time, supply runs that serve no single job, callbacks, weather, waiting. The example here assumes 80 percent so the arithmetic can be shown; yours may be higher or lower.

How do I set my own rate as an owner-operator?

Start from what you need to pay yourself for the year, add your own CPP (as a self-employed person you pay both halves, 11.9 percent in 2026 up to the maximum), add any insurance or benefits you buy, and divide by the hours you will actually spend on the tools. Owners spend a large part of the week estimating, selling and buying, so the billable share is usually far lower than a crew member's.

Do construction employees in Ontario get public holiday pay?

Under Ontario's Employment Standards Act, construction employees are not entitled to public holidays or public holiday pay if they receive at least 7.7 percent of their hourly wages as vacation or holiday pay (9.7 percent after five years), which lets an employer pay it as a percentage on every cheque. Check the current rules on ontario.ca; this is not legal advice.