Calculate effective labor rate from labor sales and billed hours, reverse-solve revenue or hours, and audit posted-rate recovery and work mix.

Use labor sales after discounts and billed hours from the same period. Exclude parts and taxes. This is realized sales per billed hour, not technician pay or profit. Currency changes labels; it does not convert amounts.

Optional settings

Optional. Blank omits posted-rate recovery and gaps.

Effective Labor Rate Formula

ELR = LS / LH
  • Where ELR is the Effective Labor Rate ($/hr)
  • LS is labor-only sales after discounts ($), excluding parts and taxes, for the selected period
  • LH is hours sold or billed (h) for the same period and work categories

Divide realized labor-only sales by hours sold or billed for the same period. This rate differs from technician pay, profit and the posted door rate. Combine categories by dividing total sales by total billed hours, rather than averaging their rates.

How to Calculate Effective Labor Rate?

The following example problems outline how to calculate Effective Labor Rate.

Example Problem #1:

  1. First, determine the total labor sales ($).
    • The total labor sales ($) are given as 500.
  2. Next, determine the total labor hours (hrs).
    • The total labor hours (hrs) are provided as 5.
  3. Finally, calculate the Effective Labor Rate using the equation above: 

ELR = LS / LH

The values provided above are inserted into the equation below and computed.

ELR = 500 / 5 = 100.00 ($/hr)

Example Problem #2: 

For this problem, the variables required are provided below:

total labor sales ($) = 600

total labor hours (hrs) = 20

Test your knowledge using the equation and check your answer with the calculator.

ELR = LS / LH = ?