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Cost Per Hour for Project Billing

Struggling with accurate project billing? Harvest simplifies time tracking, helping you set precise and profitable hourly rates.

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Will this project be profitable?

Estimate your project cost, set the right price, and know exactly how many hours your team can spend before margin disappears.

Total hours across all team members
$
Average rate across all roles on the project
15%
Scope creep is real. Most projects need 10-25% buffer to stay profitable.
Recommended project price $0
Base cost (before buffer) $0
Hours per person per week 0h
Weekly burn rate $0
Max hours before loss 0h

Track project hours with Harvest

Walk through the entire flow below. Start a timer, check your reports, and create a real invoice — all in three clicks.

Go ahead — start tracking!

One click and you're timing. Try it right here: start a timer, add an entry, edit the details. This is exactly how it feels in Harvest.

  • One-click timer from browser, desktop & mobile
  • Works inside Jira, Asana, Trello, GitHub & 50+ tools
  • Duration or start/end — your call
  • Day, week & calendar views to stay on top of it all
  • Friendly reminders so no hour gets left behind
Acme Corp
Website Redesign
Homepage layout revisions
1:24:09
Content Strategy
Blog calendar planning
1:30:00
SEO Audit
Technical audit report
0:45:00
Brand Guidelines
Color system documentation
2:15:00
Logo Concepts
Initial sketches round 1
1:00:00
Today's total 6:54:09

Understanding Your True Costs: Beyond the Hourly Wage

Calculating the true cost per hour for project billing requires more than just considering the hourly wage. It involves understanding the full spectrum of costs associated with delivering a project. First, differentiate between the "pay rate"—the direct salary of an employee—and the "cost rate," which includes benefits, taxes, and overhead expenses. For example, if an employee earns an annual salary of $72,000 and works approximately 2,080 hours per year, their base hourly cost is $34.62. However, this figure should be adjusted for overheads and benefits to reflect the actual cost rate.

To calculate your Actual Cost Per Hour (ACPH), sum up all annual costs for your team, including salaries, benefits, payroll taxes, and overhead (such as rent, utilities, and software). Divide this total by the total annual capacity—essentially, the total hours worked by all employees. Understanding your ACPH is crucial for setting a competitive and profitable billing rate that covers all expenses while ensuring sustainability.

The Art of Billable Hours: Maximizing Revenue and Efficiency

Maximizing revenue from project billing involves effectively managing and tracking billable hours. Professionals often mistake assuming all working hours are billable, when typically, only 60% of time is billable for established professionals, dropping to 40% for newcomers. To accurately gauge billable hours, subtract non-billable activities like internal meetings and training from total work hours. For instance, from 2,080 annual hours, subtract 200 for time off, leaving 1,880 hours. If 60% is billable, that's about 1,128 billable hours annually.

Implementing robust time-tracking practices is essential. Harvest offers tools to help track both billable and non-billable hours, ensuring accurate billing and efficient time use. By capturing all billable work, you can better identify areas for efficiency improvements and ensure that your billing practices align with your profitability goals.

Setting Your Price: Crafting a Profitable Hourly Rate

Setting a profitable hourly rate involves crafting a pricing strategy that covers your costs and achieves your desired profit margin. Industry benchmarks suggest a target delivery margin of 70% to effectively cover costs and profit. For instance, if your ACPH is $46, and you aim for a 70% delivery margin, your billable rate should be calculated as $46 / (1 - 0.70) = $153/hour.

Research market rates for project management services based on factors like experience, certifications, and geographical location. In the U.S., project manager consultants typically earn between $59 and $74 per hour, with a median rate of $66. Adjust your rates accordingly to remain competitive while ensuring they reflect your expertise and the value you bring to projects.

Avoiding Pitfalls and Sustaining Profitability

Common pitfalls in setting hourly rates include underestimating non-billable hours, not tracking all time accurately, and setting rates too low. These mistakes can lead to a significant 15-20% loss in billable income. To avoid these, account for non-billable time in your pricing strategy. For example, if 30% of your time is non-billable, you may need to increase your billable rate by 40-60% to maintain profitability.

Transparency with clients about billing practices and scope changes is crucial in building trust. Regularly review and adjust your billing rates based on performance and market changes. By doing so, you ensure your business remains profitable and competitive in the long term.

Calculate Project Billing Rates with Harvest

See how Harvest helps you set accurate project billing rates with precise time tracking and invoicing tools.

Harvest dashboard showing project billing rate calculation tools.

Cost Per Hour for Project Billing FAQs

  • To determine your hourly billing rate, calculate your Actual Cost Per Hour (ACPH) by dividing total annual costs by total hours worked. Next, factor in your desired profit margin and adjust for non-billable hours. Tools like Harvest can help track time and expenses accurately, ensuring your rates cover costs and achieve profitability.

  • When calculating your billing rate, consider your experience level, industry benchmarks, geographical location, and project complexity. Also, account for overhead costs and non-billable hours. For example, established professionals typically bill about 60% of their total hours.

  • Harvest provides tools for accurate time tracking, allowing you to log billable and non-billable hours with one-click timers and manual entries. This precise tracking ensures your billing rates reflect actual work done, helping maintain profitability.

  • Non-billable hours should be factored into your hourly rate. If 30% of your time is non-billable, increase your billable rate by 40-60% to cover these hours and maintain profitability. Harvest's detailed time tracking can aid in identifying non-billable activities.

  • The average hourly rate for project management services varies. In the U.S., it ranges from $59 to $74 per hour, with a median of $66. Rates can be higher for certified PM practitioners or specialized industries.

  • Overhead costs like rent, utilities, and software should be included in your billing rate calculation. They increase your actual cost per hour, which should be covered by your billable rate to ensure profitability.

  • Yes, Harvest integrates with various project management tools like Asana, Trello, Jira, and others, allowing seamless time tracking and billing across platforms.