Charge-out rate

A charge-out rate is typically used to allocate the costs of a resource that is shared among multiple users. In construction, it is often used to calculate fees for a labour resource, taking into account unproductive and non-chargeable hours.

Chargeable hours are those that are spent providing direct services for a client. For example, a consultant may calculate their fee by multiplying the number of hours a particular job will take by a charge-out rate, which enables them to cover their costs. This rate must take into account holidays, sick leave and other non-chargeable work.

There is no fixed method of calculating a charge-out rate, however, a consultant for example, might calculate the annual cost of their labour (including salary, benefits and taxes), plus overhead costs and a profit allowance. Then, the total amount is divided by the total chargeable hours per year to arrive at a charge-out rate.

Tradespeople, such as plumbers or joiners, may charge separately for materials used.

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