How to calculate billable hours
Start from the hours you work in a week, multiply by the weeks you actually work in a year, then take off the share of that time no client pays for:
- Billable hours a year = hours a week x weeks worked x (1 - non-billable share)
- Utilization rate = billable hours / 2,080, the hours in a full 52 week year
- Rate needed = income you need / billable hours
At 40 hours a week, 46 weeks and 30% non-billable, that is 40 x 46 x 0.7 = 1,288 billable hours, a utilization rate of 61.9%, and $69.88 an hour to reach $90,000. Those are the figures the calculator opens with.
Why 2,080 is the wrong number
Forty hours times fifty-two weeks is 2,080, and nobody has ever billed it. Take off six weeks for holiday, public holidays and the odd sick day and you are at 1,840. Take off the thirty percent of your week that goes on quoting, invoicing, chasing payment, buying materials and driving between jobs, and you are at about 1,288.
Set a rate against 2,080 and you will earn roughly 62% of what you planned, work exactly as hard as you expected, and have no idea why.
What actually counts as non-billable
Time quoting work you do not win. Time invoicing and chasing. Time buying and collecting materials. Travel between jobs unless you charge for it. Your own bookkeeping. Training. Answering the phone to people who are shopping around.
Twenty percent is optimistic if you also quote, chase and buy your own materials. Thirty is closer to the mark for a business of one, and forty once the admin is all yours.
The rate that follows
Once the billable hours are known, the rate is division rather than judgement: the income you need divided by the hours you can sell. It is also the number to check a quote against, because a job that pays well per hour and takes three unbillable hours of preparation may not pay well at all.
Billable hours in 6-minute increments
Lawyers, accountants and many consultants record time in tenths of an hour, so each 6 minutes is 0.1 of an hour and time is rounded up to the next tenth. A 20 minute call is billed as 0.4 hours. The chart below converts minutes to billable tenths; state the increment you use in your terms so the client can check an invoice against it.
| Time worked | Billed as |
|---|---|
| 1 to 6 minutes | 0.1 hour |
| 7 to 12 minutes | 0.2 hour |
| 13 to 18 minutes | 0.3 hour |
| 19 to 24 minutes | 0.4 hour |
| 25 to 30 minutes | 0.5 hour |
| 31 to 36 minutes | 0.6 hour |
| 37 to 42 minutes | 0.7 hour |
| 43 to 48 minutes | 0.8 hour |
| 49 to 54 minutes | 0.9 hour |
| 55 to 60 minutes | 1.0 hour |
To bill the hours once they are counted, the hourly invoice calculator turns hours and a rate into an invoice total, and the timesheet calculator adds up a week of start and finish times.
Related calculators
- Freelance rate calculatorWhat to charge, with tax and time off
- Retainer calculatorThe monthly fee, and what an hour over the cap costs
- Hourly invoice calculatorHours and a rate, into a total
Questions people ask
What are billable hours?
Hours a client actually pays for. They exclude holiday, sick days and everything you do that is real work but not chargeable: quoting, invoicing, chasing payment, buying materials and travelling between jobs.
How do you calculate billable hours?
Multiply the hours you work in a week by the weeks you work in a year, then take off the share of your time that is not chargeable. 40 hours over 46 weeks with 30% non-billable is 1,288 billable hours a year.
How many billable hours are in a year?
Far fewer than 2,080. A 40 hour week over 46 working weeks with 30% non-billable time leaves about 1,288 hours. The exact figure depends on your own time off and admin load.
What is a realistic utilization rate?
Utilization is billable hours as a share of the hours available; this calculator measures it against a full 52 week, 2,080 hour year. At 46 weeks worked and 30% non-billable it comes to 61.9%. The more of your own quoting, invoicing and buying you do, the lower it runs, so measure yours from a few weeks of real time records rather than borrowing a target.
How many billable hours per week is normal?
Fewer than the hours you work. A 40 hour week with 30% non-billable time leaves 28 billable hours in the weeks you work, and averaged over a year with six weeks off it is under 25. Enter your own week above to see your figure.
Should travel time be billable?
It can be, and on trade work it often should be. If you do not charge for it, count it as non-billable here, because it is time you cannot sell to anybody else.
What is a 6-minute billing increment?
Billing time in tenths of an hour: each 6 minutes counts as 0.1 hours, and part of an increment is rounded up. It is the usual convention in legal and accounting work. A 20 minute call is billed as 0.4 hours.
How do I use this to set my rate?
Divide the income you need by your billable hours. That is the floor. Anything charged below it has to be made up somewhere, usually out of your own time off.
Does this work for a salaried employee?
It works for anyone deciding what an hour of their time is worth. If you are comparing a salary against going out on your own, the freelance rate calculator adds tax and the benefits you would be replacing.