Labor rate calculator for auto repair shops

Works out the hourly labor rate a repair shop needs to cover its costs and leave a profit, and the rate it is getting for an hour billed.

The form is filled in with an example. Change the figures and press the button.

The rate the shop needs

For one month. Technician cost is wages and what the shop pays on top of wages, for all technicians together. Overhead is everything else the shop pays: rent, service advisors, insurance, software, equipment. Productivity is hours billed as a percent of hours paid. Gross profit on parts is what parts sales leave after their cost.

Technicians

Paid hours per technician, per month

Productivity, percent

Technician cost per month

Overhead per month

Gross profit on parts per month (optional)

Target profit, percent of labor sales

Target labor gross profit, percent

Left empty, paid hours are 173 (40 hours a week), productivity is 85%, gross profit on parts is $0.00, target profit is 10% and target labor gross profit is 70%. These are examples to start from, not advice. This page does not say what a shop should charge, and says nothing of what other shops charge.

The rate the shop is getting

For one period, such as last month. The two parts are worked out apart: leave every field of one part empty to work out only the other.

Labor sales in the period

Hours billed in the period

Posted rate, per hour (optional)

Technician cost in the period (optional)

Result

This is the result of the example in the form.

The rate the shop needs
Figure	Amount
Hours billed per month	441.15
Labor sales needed per month	$34,444.44
Rate needed, per hour billed	$78.08
Break-even rate, with no profit	$70.27
Rate from the target labor gross profit	$136.01

The rate needed is the lower of the two rates: the target labor gross profit leaves more profit than was asked for.

Labor gross profit at the rate needed: 47.742%. That is below the typical range of 60% to 75% for labor gross profit. The usual target is 70%.

These figures are for a general repair shop. A tire shop or a heavy-duty shop runs different numbers. The range is given as typical by WickedFile, and the usual target as what shops aim for by Elite Worldwide and PartsTech. Neither is a survey of what shops earn.

The rate the shop is getting
Figure	Amount
Effective labor rate, per hour billed	$92.31
Effective rate as a percent of the posted rate	76.925%
Posted rate less effective rate, per hour	$27.69
Posted rate × hours billed, less labor sales	$14,400.00

The shop is getting less for an hour billed than it posts.

Labor gross profit: 62.5%. That is inside the typical range of 60% to 75% for labor gross profit. The usual target is 70%.

How this is worked out

Hours billed = technicians × paid hours per technician × productivity. Productivity is hours billed as a percent of hours paid.

Labor sales needed = (technician cost + overhead − gross profit on parts) ÷ (1 − target profit). Rate needed = labor sales needed ÷ hours billed. The break-even rate is the same with a target profit of zero.

Labor gross profit = (labor sales − technician cost) ÷ labor sales. Technician cost is wages and what the shop pays on top of wages.

Rate from the target labor gross profit = technician cost ÷ hours billed ÷ (1 − target labor gross profit). It needs no overhead figure, so the page shows it beside the rate needed and says which is the higher.

Effective labor rate = labor sales ÷ hours billed, for one period. As a percent of the posted rate it is effective rate ÷ posted rate. Over the period, the difference is posted rate × hours billed − labor sales.

The posted rate and the effective rate differ because not every hour billed is sold at the posted rate: discounts, warranty and internal work, and jobs sold at a menu price all change what an hour brings in.

Each amount is rounded to the nearest cent, once, where it is shown.

This is arithmetic, not accounting or tax advice.

Wenmar Pro is shop management software from the people who make this site.