What is a floor rate, and how do you work out yours?

The lowest hourly rate at which an average hour of your work covers its own cost. It is not a price and it is not a target — it is the line below which a job loses money however busy you are. Working it out takes five steps and an evening. All five are below, with a worked example you can check line by line.

Why the going rate isn’t your rate

A going rate is an average of other firms' prices, and those prices were set by other firms' costs — their wages, their vans, their rent, and above all their share of paid hours that reach an invoice.

Two firms on the same street can have floors a third apart without either doing anything wrong. One runs four vans on 26 billable hours a week each; the other on 32. Same wages, same overheads, and the second firm's floor is 19% lower — not because they are cheaper, but because they are busier with the same fixed costs.

The inputs to the example

Bare wage£19.00/hour^a

Hours you pay for40/week each^a

Hours that reach an invoice26/week each^a

Field staff4^a

Vehicle cost£95/week each, 4 vans^a

Overheads£3,200/month^a

The arithmetic

Five steps. An employed plumber in a four-van firm.

Step 1

The wage you pay a field member£19.00/hr^a

The hourly rate on their contract. Not what you charge for them, and not what you pay yourself.

Step 2

Plus what employing them costs on top£24.71/hr^d

£19.00 × (1 + 30.07%) = £24.71

Employer's National Insurance 15.00%, Auto-enrolment pension 3.00%, Statutory holiday 12.07%. Rates change — use your own current figures.

Step 3

Divided by the share of paid hours that get invoiced£38.02/hr^d

£24.71 ÷ 65.0% = £38.02

You pay for 40 hours and invoice 26. The other 14 — travelling, quoting, the merchants, the customer who wasn’t in — still get paid for, so every invoiced hour carries them. Skipping this step is the most common way a rate ends up too low.

Step 4

Plus vans£3.65/hr^d

£95 × 4 × 52 = £19,760/yr ÷ 5,408 hrs = £3.65

Step 5

Plus overhead£7.10/hr^d

£3,200 × 12 = £38,400/yr ÷ 5,408 hrs = £7.10

Your floor, per billable hour£48.77^d

Add the three printed figures and you get £48.77 — the same as the total, so this example reproduces exactly from what is on the page. It does not always: each line is rounded for display and the total is not. That is worth saying out loud rather than quietly fixing. In your own report, any line that will not reproduce from the figures printed beside it is shown at more decimal places until it does.

Utilisation

Why billable hours move it more than anything else.

It is the only input that divides all three parts at once. A wage rise moves the labour line. A new van moves the vehicle line. Billable hours move labour, vans and overheads together — which is why the same firm, with identical costs, has a floor that swings by a third across a plausible range of busy-ness.

Billable hrs / week, each	Utilisation	Floor becomes	Against today
20	50.0%	£63.41/hr	+30%
22	55.0%	£57.64/hr	+18%
24	60.0%	£52.84/hr	+8%
26 — the example	65.0%	£48.77/hr	—
28	70.0%	£45.29/hr	-7%
30	75.0%	£42.27/hr	-13%
32	80.0%	£39.63/hr	-19%

Everything except billable hours is held at the worked example’s figures. Illustrative, not a benchmark — we have no basis for telling you what a typical firm’s floor is, and neither does anyone quoting one at you.

By hand, in an evening

01
The wage
The hourly rate you actually pay a field member. If they are on a salary, divide by the hours you pay for.
02
The on-costs
Employer's NI, pension, holiday, sick pay, liability, tools, training — as one percentage on top of the wage. If unsure, err high.
03
The billable share
Hours per person that actually appeared on an invoice, over the hours you paid for. Take it from records, not memory — almost everyone guesses high.
04
The vans
Annual cost of every vehicle — lease or depreciation, fuel, insurance, tax, servicing, tyres.
05
The overheads
Twelve months of everything you would still pay in a week with no jobs booked.
06
The divisor
Billable hours per person per week × field staff × 52. Divide the van and overhead totals by that, and add both to your loaded labour figure.

Where we come in

Nothing above is proprietary and none of it is withheld — it is the arithmetic, in the order we do it, at figures you can check. If you have an evening and reasonably tidy records, do it yourself. It is the same answer.

The Full report applies this method: reviewing up to five years of your jobs out of whatever shape they are in, classifying them consistently, running this build-up from your own answers, holding every job type against the result, and having a person read the finished document against your records before it reaches you.

Two warnings from doing this on real firms' records. Do not use paid hours as the divisor — that understates the floor by a third. And do not fold materials into the rate: they pass through at cost and vary by job, and burying them hides the jobs where they eat the margin.

Put the floor rate to work.

Compare overhead per billable hour and flat rate versus time and materials before choosing how to charge.

Or have it done on your year, and checked.

Full report: £400 · up to 5 years of your jobs · 5 working days

Up to five years of your jobs, each type held against a floor built from your own numbers.

Compare the smaller Core report

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