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Hourly Rate Formula:
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The NZ Contractor Hourly Rate Calculator helps contractors in New Zealand determine their appropriate hourly rate by considering their desired salary, business overhead costs, and billable hours. This ensures contractors price their services competitively while covering all expenses.
The calculator uses the following formula:
Where:
Explanation: This formula ensures that your hourly rate covers both your personal income needs and business expenses while accounting for the actual time you can bill clients.
Details: Properly calculating your hourly rate is crucial for contractors to ensure business sustainability, cover all expenses, maintain profitability, and remain competitive in the New Zealand market.
Tips: Enter your desired annual salary, annual business overhead costs, and total billable hours per year. All values must be valid positive numbers, with billable hours greater than zero.
Q1: What should be included in overhead costs?
A: Overhead should include all business expenses such as office rent, utilities, insurance, software subscriptions, equipment, marketing, and professional fees.
Q2: How do I estimate my billable hours?
A: Calculate total working hours minus time for administrative tasks, holidays, sick days, and business development. A typical contractor might have 1,200-1,800 billable hours annually.
Q3: Should I adjust for taxes in this calculation?
A: Your salary should be your desired post-tax income. The calculated hourly rate will need to cover both your income and business taxes.
Q4: How often should I recalculate my hourly rate?
A: Review your rates annually or whenever your expenses, desired income, or market conditions change significantly.
Q5: Is this calculation specific to New Zealand contractors?
A: While the formula is universal, it's particularly relevant for NZ contractors who need to account for local market rates, tax structures, and business costs.