Effective hourly rate calculator: what a fixed-fee job really paid
Take the job's own costs off the fee, before GST, and divide by every hour the job took, not only the hours on the work itself. A $4,500 job with $250 of costs that took 38 hours of work and 14 hours of revisions, calls and travel paid $81.73 an hour, not the $111.84 the quote assumed.
Worked out for the example. Change the boxes to make it yours.
| Fixed fee, before GST | $4,500.00 |
|---|---|
| Less the job's own costs | -$250.00 |
| What the work earned | $4,250.00 |
| Hours on the work itself | 38 hours |
| Hours on revisions, calls, travel and admin | 14 hours |
| All the hours on the job | 52 hours |
| Effective rate an hour | $81.73 |
| The rate if only the work itself counted | $111.84 |
| The extra hours cost you, an hour | $30.11 |
| Against the $90.00 an hour you aim for | -$8.27 an hour |
| Hours the fee covers at $90.00 | 47.22 hours: below your rate after that |
| Fee these hours needed at $90.00 an hour | $4,930.00 ($430.00 more) |
| With GST at 15%, the client paid | $5,175.00 ($675.00 GST to pass on) |
- The job dropped below $90.00 an hour after 47.22 hours. When you quote the next job like it, allow for the 14 hours of revisions, calls, travel and admin, or set a limit on revisions in the quote.
- Before income tax, ACC and any student loan, which are worked on your year's profit rather than one job.
- The GST on the fee is passed to Inland Revenue, so it is not part of what the work earned.
Free on every plan. Your account adds this client to Your Timesheets as contract work, after asking, so you can log every hour of the next job. Fixed-fee projects, with what each earned an hour in Reports, are on the Career and Timesheets plan or On the Move.
What the fee really paid
A fixed fee is quoted on the hours you expect the work to take, but the job also takes hours nobody quotes for: the first meeting, emails, changes the client asks for, travel, sending the invoice and chasing it. The effective rate counts them all. Take the costs you paid for this job off the fee, then divide by every hour. In the example, $4,500 less $250 of costs is $4,250, and over 52 hours that is $81.73 an hour. The 38 hours of work alone would have paid $111.84, so the 14 extra hours cost $30.11 on every hour of the job.
Against the rate you aim for
Give the hourly rate you usually charge and the calculator shows three more things. The gap is the effective rate less your rate: $8.27 an hour under $90 in the example. The hours the fee covers is the fee less costs divided by your rate, 47.22 hours, so every hour past that was paid below $90. And the fee these hours needed is your rate times all the hours, plus the costs: $4,930, or $430 more than was charged. That last figure is the one to take into the next quote for similar work. Our article on negotiating a contract rate covers putting a higher figure to a client.
GST and tax
Everything here is before GST. If you are registered, the 15% you add to the invoice is passed to Inland Revenue with your GST return, so it was never part of what the work earned: the client paid $5,175, and $675 of it is GST. The effective rate is also before income tax, ACC's earners' levy and any student loan, which are worked out on your profit for the whole year rather than one job. Our guide to invoicing as a contractor covers what the invoice must show.
Using it on the next job
The extra hours are rarely a one-off, so the useful habit is to log every hour on a fixed-fee job as it happens, including the calls and the travel. After a few jobs you know your usual ratio of extra hours to work hours and can price it in, cap the number of revisions in the quote, or charge for changes beyond it by the hour. A salaried employee working unpaid hours has the same problem in reverse, and our article on unpaid overtime and your real hourly rate works through it.
Questions
How do I calculate my effective hourly rate on a fixed-price job?
Take the costs you paid for the job off the fee, before GST, and divide by every hour the job took, including revisions, calls, travel and admin, not only the hours on the work itself.
Should I include GST when I work out my hourly rate?
No. If you are registered, the GST on the fee is passed to Inland Revenue, so work out the rate on the fee before GST.
How many hours can I spend on a fixed fee before I lose money against my rate?
Divide the fee, less the job's costs, by your usual hourly rate. For $4,250 at $90 an hour that is 47.22 hours: every hour past it is paid below $90.
Is a fixed fee better than charging by the hour?
It pays better when you finish faster than the quote and worse when the job runs over. Tracking the real hours on each fixed-fee job tells you which way your own work goes.
What happens when I save this?
Your account adds the client to Your Timesheets as contract work, after asking, ready for you to log the hours on your next job. The fee and hours here are not saved. On the Career and Timesheets plan or On the Move, a project can be billed as a fixed fee, and Reports show what it earned an hour as you log hours.
Sources
- Goods and Services Tax Act 1985, s 8.
- Inland Revenue: registering for GST.
- Minimum Wage Order 2026 (SL 2026/16).
More free tools: see all the calculators.