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

01

What is a floor rate?

It is the cost of one hour of your capacity, expressed as an hourly rate. Everything the firm spends to have somebody available and equipped for an hour — their wage, the tax and holiday you pay on top of it, the van they arrive in, the phone that was answered to book them — divided by the hours that actually reach an invoice.

Charge above it and the hour contributes something. Charge below it and the hour costs you money, and doing more of that work makes the year worse rather than better. That is the whole idea: a floor is the number that tells you which of your busy weeks were worth having.

A floor is not a price. A price also has to carry materials, the jobs you quoted and did not win, the ones that came back under warranty, and a profit. The floor is where pricing starts, not where it lands.

02

Why isn't the “going rate” my rate?

Because a going rate is an average of other firms' prices, and those prices were set by other firms' costs. The going rate in your town reflects somebody else's wages, somebody else's vans, somebody else's rent, and — above all — somebody else's share of paid hours that reach an invoice.

Two firms on the same street can have floors a third apart without either of them doing anything wrong. One runs four vans on 26 billable hours a week each; the other runs four vans 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.

So “everyone round here charges £55 an hour” tells you what the market will bear. It does not tell you whether £55 covers your costs, and those are different questions. The first is worth knowing. Only the second stops you losing money.

03

What is the arithmetic, in full?

Five steps. The example is an employed plumber in a four-van firm at figures that would not surprise anyone in 2026 — adjust each input to your own and the method is unchanged.

04

Why does utilisation move it more than anything else?

Because 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.

This is also why “we're flat out” and “we're not making money” are not contradictory. Flat out with 14 unbillable hours a week per head is a different business from flat out with 8, and the second one can charge 19% less for the same work without losing anything.

05

How do I work out mine by hand?

An evening, a spreadsheet, and six numbers you already have. In this order:

1. 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.

2. 02

   The on-costs

   Employer's NI, pension, holiday, sick pay, employer's liability, tools, training. Add them as a single percentage on top of the wage. If you are not sure, err high — a floor that is too low is the expensive mistake.

3. 03

   The billable share

   Over a normal month, how many hours per person actually appeared on an invoice? Divide by the hours you paid for. Take this from records rather than memory: almost everyone guesses high, and this is the input the answer is most sensitive to.

4. 04

   The vans

   Annual cost of every vehicle — lease or depreciation, fuel, insurance, tax, servicing, tyres.

5. 05

   The overheads

   Twelve months of everything you would still pay in a week with no jobs booked.

6. 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.

Two warnings from doing this on real firms' records. Do not use paid hours as the divisor — that is the single most common error and it understates the floor by a third. And do not fold materials into the rate: materials are a pass-through that varies by job, and burying them in an hourly figure hides the jobs where they are eating the margin.

06

What does a floor rate not tell you?

It is one number for the whole firm, and your jobs are not one thing. A floor says an hour costs £48.77; it does not say which of your job types recover that and which quietly do not, because that depends on how many hours each type actually consumes against what it invoices — and averages by type is a different calculation on a year of records.

It also says nothing about materials, which pass through at cost and vary hugely by job, nor about the jobs that overrun, nor about the customer who has been on the same rate since 2023. Those are the findings that usually move the money. The floor is what you measure them against.

Where we come in

This is the method. The product is running it on your records.

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.

What we sell is the fortnight: pulling twelve months 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. Every figure marked with where it came from, every judgement listed with what it changes.