# 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. This page describes the calculator and does not compute. The calculator is a web page with a form.

## What you enter

The form has two parts that share one button. A part with nothing typed in it is not worked out, so either can be used alone.

For the rate the shop needs, for one month: the number of technicians; paid hours per technician; productivity, which is hours billed as a percent of hours paid, from 1% to 200%; technician cost for all technicians together, which is wages and what the shop pays on top of wages; overhead, which is everything else the shop pays (rent, service advisors, insurance, software, equipment); optionally, gross profit on parts, which is what parts sales leave after their cost; target profit as a percent of labor sales, from 0% to 99%; and target labor gross profit, in the same range.

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.

For the rate the shop is getting, for one period: labor sales; hours billed; optionally, the posted rate; and optionally, technician cost for the period.

Money may be written as 1234.5, 1,234.50 or $1,234.50, up to $99,999,999.99. A percent may be written with or without the sign. The number of technicians is a whole number, up to 1000.


## 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.


## The target

Labor gross profit is shown beside a target for labor gross profit: a typical range of 60% to 75%, and a usual target of 70%. The page says whether the figure is below, inside or above the range. The usual target is also what the target labor gross profit field takes when it is left empty.

The range and the target are for a general repair shop, and come from the pages below. They are what those pages call typical and what they say shops aim for, not a survey of what shops earn.

- [WickedFile: Parts vs. Labor Margin: Why Most Auto Repair Shops Are Getting It Backwards](https://www.wickedfile.com/blogs/parts-vs-labor-margin-auto-repair/)
- [Elite Worldwide: Six Strategies to Keep Your Auto Repair Shop Profitable](https://eliteworldwide.com/info-center/six-strategies-to-keep-your-auto-repair-shop-profitable/)
- [PartsTech: 5 Keys to Maximizing Your Shop's Profits](https://partstech.com/resource/blog/the-keys-to-maximizing-your-shops-profits/)

## A worked example: the rate the shop needs

The example has these figures. Technicians: 3; Paid hours per technician, per month: 173; Productivity, percent: 85; Technician cost per month: 18000.00; Overhead per month: 25000.00; Gross profit on parts per month (optional): 12000.00; Target profit, percent of labor sales: 10; Target labor gross profit, percent: 70.

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%.

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

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 |


## A worked example: the rate the shop is getting

The example has these figures. Labor sales in the period: 48000.00; Hours billed in the period: 520; Posted rate, per hour (optional): 120.00; Technician cost in the period (optional): 18000.00.

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%.

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 |


## A link to a filled-in form

Every field is in the address, so a filled-in form can be linked to, bookmarked and printed. Nothing is stored. The fields of the first part are technicians, paid_hours, productivity, technician_cost, overhead, parts_profit, target_profit and target_labor. The fields of the second part are labor_sales, hours_billed, posted_rate and period_cost. This address is the example above:

```
https://open.wenmarpro.com/tools/labor-rate?technicians=3&paid_hours=173&productivity=85&technician_cost=18000.00&overhead=25000.00&parts_profit=12000.00&target_profit=10&target_labor=70&labor_sales=48000.00&hours_billed=520&posted_rate=120.00&period_cost=18000.00
```


## Use it

This is arithmetic, not accounting or tax advice.

- [Labor rate calculator for auto repair shops](https://open.wenmarpro.com/tools/labor-rate)