Ask ten tradies how they set their hourly rate and you'll hear ten versions of "I charge what everyone else charges." That's a starting point, but it doesn't tell you whether the rate actually pays you a wage, covers the ute and the tools, and leaves something over when work goes quiet. Plenty of busy sole traders find out at tax time that they've been working for less than an employee would earn.
This guide walks through a simple way to build your hourly rate from the ground up, so you know your number before you compare it with the market. It's written for sole traders and small trade businesses in Australia, and it's current as at November 2026.
Why "what everyone else charges" isn't enough
The going rate in your area matters, and you'll check it at the end. But other tradies' costs aren't your costs. One electrician runs a paid-off ute from home; another leases a new van, rents a workshop and pays an apprentice. If both charge the same rate, one of them is probably undercharging.
Your rate needs to cover four things:
- a fair wage for you, at least what you'd earn as an employee doing the same work,
- the on-costs an employer would normally pay, such as super, leave and insurance,
- your business overheads, from fuel and tools to your accountant and phone plan, and
- a margin, so the business makes a profit and can ride out slow months.
The trick is to divide all of that by the hours you can actually bill, not the hours you work.
Step 1: Start with the wage you'd earn as an employee
Begin with the pay you'd expect for the same work as an employee. For most trades that's set by an award, which will usually be higher than the National Minimum Wage. The Fair Work Ombudsman's minimum wages page says the National Minimum Wage is $26.44 an hour from 1 July 2026, and award rates rose by 4.75% on the same date. Use the Fair Work Pay and Conditions Tool or your own experience of what qualified tradies are paid locally.
Be honest here. If you'd be paid more than the award as a leading hand or a specialist, use that figure. You're the one taking the risk, so your wage shouldn't be lower than what you'd earn working for someone else.
Step 2: Add the on-costs nobody pays you any more
As an employee, your employer paid for things that never showed up in your hourly rate. As a sole trader, nobody pays them for you, so your rate has to.
What an employee is paid for that a sole trader has to fund from their rate
Employees get super, paid leave and paid public holidays on top of their hourly pay. As a sole trader, none of these is paid for you, so your rate has to cover them.
| Cost | What an employee gets | Source |
|---|---|---|
| Super | 12% super guarantee on qualifying earnings, paid by the employer | ATO, Super guarantee percentage |
| Annual leave | 4 weeks of paid annual leave a year for full-time employees (pro rata for part-time) | Fair Work Ombudsman, Annual leave |
| Sick and carer's leave | 10 days of paid sick and carer's leave a year for full-time employees (pro rata for part-time) | Fair Work Ombudsman, Sick and carer's leave |
| Public holidays | A paid day off when a public holiday falls on a normal working day | Fair Work Ombudsman, Public holidays |
| Workers compensation | Covered by the employer's policy. In NSW a sole trader can't cover themselves under a workers compensation policy | icare NSW, Who needs workers insurance |
| Minimum pay | The National Minimum Wage is $26.44 an hour from 1 July 2026 (most trades are covered by an award with higher rates) | Fair Work Ombudsman, Minimum wages |
Some of these are costs and some are time:
- Super. Employers pay 12% super guarantee on top of wages. Sole traders aren't required to pay super for themselves, but you'll want to, and the ATO explains how personal contributions can be claimed as a deduction. See our guide to super for sole traders.
- Annual leave, sick days and public holidays. A full-time employee gets 4 weeks of paid annual leave, 10 days of paid sick and carer's leave, and paid public holidays. You don't get paid for any of those days, so they come out of your billable time.
- Your own insurance. Public liability is a business cost. If you get hurt, there's usually no workers compensation for you, so many sole traders pay for income protection or personal accident cover. Our guide to workers compensation by state explains who's covered.
Step 3: Add up your overheads
Overheads are everything the business spends that you can't charge straight to one job. Go through your bank statements for the last 12 months, or estimate if you're just starting. A typical list for a trade business:
- vehicle: repayments or lease, fuel, rego, insurance, servicing and tyres,
- tools and equipment: purchases, repairs, replacement and hire,
- insurance: public liability, tools, vehicle and income protection,
- licences, registrations and memberships,
- phone, internet and software,
- accountant or bookkeeper,
- marketing: website, signage and listings,
- workwear and safety gear,
- bank fees and interest, and
- training and tickets.
Don't include materials you buy for a specific job. Those go on the quote for that job, usually with a markup. Our guide to how to quote a job covers pricing materials.
Step 4: Work out your real billable hours
This is where most rates go wrong. A year has 52 weeks, but you won't bill all of them. Take off:
- 4 weeks you'd have as annual leave,
- 2 weeks (10 days) for sickness and caring, to match an employee's entitlement,
- public holidays in your state, and
- any regular quiet period, such as the Christmas shutdown.
Then think about a normal week. You might be on the tools for 38 hours or more, but some of that is travel between jobs, quoting, picking up materials and doing paperwork. Unless you charge for that time separately, it isn't billable. Many tradies find their billable hours are well below the hours they work. Track your own for a month to find out.
Your yearly billable hours are the billable weeks multiplied by the billable hours in a typical week.
Step 5: Put it together
The basic formula is:
Hourly rate = (your wage + on-costs + overheads + profit) ÷ billable hours
How an hourly rate is built Illustrative
The order this guide works through, from what you need to earn to the rate you charge.
- Your wageWhat you'd need to earn as an employee for the same work.
- On-costsSuper, leave, public holidays and your own insurance.
- OverheadsVehicle, tools, phone, software, insurance, accountant.
- Billable hoursThe hours you can actually charge, not the hours you work.
- MarginProfit on top, so the business can grow and ride out quiet months.
- Check the marketCompare with what similar trades charge locally.
Work out each part as a yearly figure, add them together, then divide by your yearly billable hours. Add GST on top if you're registered for GST: the ATO's GST registration rules say you must register once your GST turnover reaches $75,000. Prices you show to consumers must include GST.
Profit isn't greed. It's what pays for the next ute, a slow month or a bad debt. Decide on a margin and build it in rather than hoping there's something left at the end.
Step 6: Check it against the market
Now compare your number with what similar trades charge in your area: ask around, look at competitors' websites and listings, and notice where you win and lose quotes. Three outcomes are common:
- Your rate is close to the market. Good. Charge it with confidence.
- Your rate is higher. Look for overheads you can trim, or ways to bill more hours. Or charge it anyway and make sure your service justifies it. Fast replies, clear quotes, a tidy site and good reviews let you charge more than the cheapest operator.
- Your rate is lower. You may be underestimating your costs. Check your overheads and billable hours again before you undercut anyone.
Hourly rate, day rate or fixed price?
Your hourly rate is the building block, even if you don't quote by the hour.
- Hourly or day rates suit repairs, maintenance and jobs where the scope is unclear. Make your minimum charge or call-out fee cover travel and set-up.
- Fixed-price quotes suit jobs you can scope properly. Customers like knowing the price upfront, and you keep the benefit if you work efficiently. Price the labour using your hourly rate, then add materials and any subcontractors.
Whichever you use, the ACCC's price display rules say a price shown to consumers must be the total price, including GST and any unavoidable fees. From 1 October 2026 you also can't add a surcharge for paying by Visa, Mastercard, American Express or eftpos cards.
Review your rate every year
Costs change. Award wages usually rise on 1 July, insurance renews, fuel moves and you'll buy new gear. Put a reminder in your calendar to rework your rate once a year, and tell regular customers about any increase in writing before it applies.
It's also worth checking which jobs actually make money. Job costing tells you whether your quoted hours match reality. Tradie Business tracks job costing and margin per job and timesheets from your phone, so you can see where the hours go. It's built for Australian trades, with a 30-day free trial. See pricing.
Common mistakes to avoid
- Dividing by 52 weeks of 38 hours. You'll never bill that many, so your rate comes out too low.
- Forgetting your own super and insurance. They're real costs, even though nobody sends you a bill until it's too late.
- Not charging for travel and quoting time. Build it into a call-out fee, a minimum charge or your hourly rate.
- Matching the cheapest competitor. Someone has to be the cheapest, and it doesn't have to be you.
- Never putting your rate up. If your rate hasn't moved in three years, your costs have, so you're earning less.
Where to get help
- An accountant or registered tax agent can check your numbers and help with tax and super.
- business.gov.au has guides on payment terms and cash flow.
- The Fair Work Ombudsman explains the National Employment Standards if you're comparing your rate with an employee's pay.
Once your rate is sorted, the next step is making sure you get paid on time. Read our guide to getting paid on time and security of payment.
