Overhead Cost Calculator (Free Excel Template + Step-by-Step Guide)

Free Overhead Cost Calculator (Excel Template Download)

We understand that calculating overhead by hand gets messy fast, especially when you're juggling multiple employees, expense categories, and shifting cost allocations.

That's why we built a free overhead cost calculator that does the heavy lifting for you. It lets you:

• Enter your overhead expenses, employee wages, benefits, and billable hours in one place
• Automatically calculate your overhead rate, true employee cost, and fully burdened hourly rate
• Test different scenarios (e.g. adding a new hire, adjusting overhead allocation, or changing margin targets)
• Export the results or plug them straight into your quoting process

Using a pre-built spreadsheet keeps your numbers accurate and saves hours of setup, especially when you're scaling up or pricing jobs under pressure.

Download the Free Overhead Cost Calculator Excel Template

What This Overhead Cost Calculator Helps You Calculate

Most trade businesses know overhead exists. Very few have an accurate figure for what it actually costs per hour or per job. That gap is where the margin disappears.

This calculator works through six figures that most businesses either estimate poorly or skip entirely.

• Total employee cost beyond salary. The wage on the payslip is only the starting point. Superannuation, payroll tax, workers' compensation, and leave loading routinely add 20–30% on top of base salary before a single indirect business cost is counted.
• Labour burden. This covers every on-cost tied directly to employing someone: payroll taxes, superannuation contributions, leave entitlements, and insurance premiums. Most business owners underestimate this figure by thousands of dollars per employee each year.
• Total overhead expenses. Every cost that keeps the business running but cannot be attributed to a single job belongs here: rent, vehicles, tools, software, administration, and compliance costs. These accumulate quietly and are rarely captured in full.
• Overhead rate as a percentage and per hour. Once total overhead is known, this calculator expresses it in two ways: as a percentage of direct labour costs and as a dollar figure per billable hour. Both are useful depending on whether you are reviewing margins or building a quote.
• Cost per employee and cost per job. With labour burden and overhead combined, the calculator produces a true cost figure for each employee and a foundation for costing individual jobs accurately. Understanding your labour burden rate alongside overhead is what makes these figures reliable.
• Billable hourly rate. The final output is the minimum rate you need to charge per hour to cover all costs. This is the floor beneath every quote. Anything below it loses money, regardless of how busy the business is.

The common thread across all six is underestimation. Vehicles cost more than fuel and rego. Employees cost more than their salary. Overhead accumulates in ways that spreadsheets and gut feel consistently miss. This calculator is designed to close that gap with real numbers.

How To Use The Overhead Cost Calculator (Step-By-Step)

Work through the following 5 steps in order, and you will have a complete cost picture at the end. The formulas are pre-built, so the only inputs required are your own figures in the highlighted cells.

1. Enter employee wages or salary. Input each employee's annual salary or hourly rate. For hourly employees, multiply by their average weekly hours and then by 52 to get an annualised figure.

2. Add burden costs. Input payroll taxes, superannuation contributions, workers' compensation premiums, and leave loading. These are the on-costs that sit on top of base wages and are most often underestimated.

3. Input overhead expenses. List all indirect costs: rent, utilities, vehicle running costs, equipment depreciation, insurance, software subscriptions, and administration wages. If a cost supports the business but cannot be directly attributed to a single job, it belongs here.

4. Add total working or billable hours. Enter the number of hours your team is genuinely available to bill clients. This figure should account for leave, training, travel, and non-billable admin time, not just contracted hours.

5. Review calculated outputs. The template will return your overhead rate as a percentage of labour, your overhead cost per billable hour, your fully burdened hourly rate, and your total cost per employee.

All division logic and SUM formulas are pre-built. If you want to check or modify any calculation, the formula bar in Excel will show you exactly what each cell is doing.

How To Calculate Overhead Rate And Employee Cost Accurately

The calculator handles the arithmetic, but understanding the underlying logic will help you apply the figures correctly, particularly when quoting jobs or reviewing profitability. The three formulas below are the foundation of the entire calculation.

Overhead Cost Formula

Overhead rate is typically expressed as a percentage of direct labour cost. It tells you how much indirect cost is generated for every dollar of direct labour the business produces.

Overhead Rate (%) = (Total Overhead Costs / Total Direct Labour Costs) x 100

How To Calculate Overhead Rate

1. Add up every indirect cost for the year (rent, utilities, insurance, vehicles, admin salaries, software subscriptions, marketing, accounting fees, training, tools below your capitalisation threshold).
2. Add up all wages and salaries paid to billable staff for the same period.
3. Divide overhead by direct labour, then multiply by 100 for the percentage.
4. For the per-hour figure, divide total overhead by total annual billable hours across the team.

Example: A plumbing business with $120,000 in annual overhead and $300,000 in direct labour costs has an overhead rate of 40%. This means that for every $100 of labour billed, $40 must also be recovered to cover indirect costs. If the business is quoting without accounting for that 40%, it is consistently underpricing every single job.

The overhead rate can also be expressed as a per-hour figure, which is often more practical for job costing. Simply divide total annual overhead by total annual billable hours. The same plumbing business billing 6,000 hours per year carries an overhead cost of $20.00 per billable hour.

Employee Cost Formula (True Cost Per Employee)

True employee cost is the full annual cost of employing someone, including every on-cost layered on top of their base wage. It is almost always significantly higher than the salary figure, and it is the number that should drive your pricing, not the wage.

True Employee Cost = Base Salary + Payroll Tax + Superannuation + Workers Compensation + Leave Loading + Any Other On-Costs

How To Calculate True Employee Cost

1. Start with the base annual salary or wage.
2. Add superannuation at 11.5% of salary.
3. Add payroll tax (rates vary by state, check your state revenue office).
4. Add the annual workers' compensation premium for that role.
5. Add leave loading: 4 weeks of leave × weekly wage × 17.5%.
6. Add any other on-costs (allowances, training, PPE, phone, vehicle).
7. Divide the total by realistic billable hours per year (typically 1,600 to 1,800 after stripping out leave, sick days, training, and travel between jobs).

Example: An electrician on a $75,000 salary may cost the business $88,945 annually once superannuation ($8,625), payroll tax ($2,250), workers' compensation ($1,800), and leave loading ($1,270) are added. Divided across 1,700 billable hours, the true hourly employee cost is $52.32 before a single dollar of overhead is applied.

Fully Burdened Hourly Rate Formula

The fully burdened hourly rate is the minimum rate you need to charge per hour to cover both the true cost of the employee and a proportional share of business overhead. It is the floor beneath which every hour you bill loses money.

Fully Burdened Hourly Rate = True Hourly Employee Cost + Overhead Cost Per Hour

This rate forms the foundation of accurate job estimation. When each job is built from a known cost floor, quoting decisions become far more defensible.

How To Calculate The Fully Burdened Rate

1. Take the true hourly employee cost from the previous calculation.
2. Add the overhead per billable hour from the overhead rate calculation.
3. The result is your break-even hourly rate.
4. To apply a margin, divide the break-even rate by (1 minus your target margin as a decimal). For a 20% margin, divide by 0.8.

Example: A commercial cleaning business calculates its overhead at $14.50 per billable hour. A team leader on a $68,000 salary works out to a true hourly cost of $46.80 after on-costs are added and divided across 1,650 billable hours.

$46.80 (true employee cost) + $14.50 (overhead per hour) = $61.30 fully burdened rate

To generate a 25% margin: $61.30 ÷ 0.75 = $81.73 per hour

If the business has been quoting this role at $75 per hour, it is collecting $6.73 less than the target sell rate on every billable hour. Across 1,650 hours a year, that is more than $11,000 of margin lost per team leader, before factoring in any non-billable time written off.

To understand how this feeds into final job pricing, this job costing formula guide covers how to layer materials, subcontractors, and margin on top of these labour and overhead figures.

Why Most Businesses Underestimate Overhead (And Lose Margin)

You don't lose margin in one big hit. You lose it in slow leaks across dozens of costs that never show up on a job sheet, never trigger an alarm, and never make you stop and question your pricing. By the time you notice, it has been happening for years.

Vehicle costs are where it usually starts. Most owners price in fuel and rego, then forget everything else. Tyres. Servicing. Depreciation. The hour your team loses driving between jobs. Run the real numbers and a single work vehicle costs $18,000 to $25,000 a year to keep on the road. If that figure is not loaded into your hourly rate, every kilometre is coming out of your profit.

Software subscriptions creep up the same way. Tool replacement. Safety compliance. The hours your office spends chasing invoices, fixing quotes, and answering supplier calls. Each one feels small. Stack them together and you are looking at tens of thousands of dollars a year that the business is absorbing instead of recovering.

This is why so many trade businesses end the year wondering why a strong revenue figure produced a disappointing profit. The work was there. The team was busy. The jobs were quoted at what felt like a fair rate. But overhead was always running in the background, uncosted and unrecovered.

If you want a sense check, the Australian Taxation Office publishes small business benchmarks by industry. If your cost ratios sit outside the typical range for your trade, the gap is usually overhead you are not capturing. For a broader view of what to track alongside cost, the field service metrics guide covers the KPIs most field service businesses should be monitoring.

Mekhane Roofing knew the feeling. Jobs were running, teams were busy, but profitability was hard to see and harder to act on. Without the data to pinpoint where margin was leaking, decisions came down to instinct rather than evidence.

As General Manager Josiah (Joss) puts it: "I believe data is king and if we can model the right data sets and then report on those in a way that provides strategic information, it allows us to steer our business. It's really the guidance system in many ways for our business. If I didn't have simPRO, I probably still wouldn't be in the trade services industry to be completely honest."

- Josiah (Joss), General Manager, Mekhane Roofing

When To Use An Overhead Cost Calculator (Real Use Cases)

An overhead calculator is useful far beyond the initial setup. Here are the situations where running or revisiting these calculations makes a material difference to the business.

• Quoting jobs accurately. When you know your fully burdened hourly rate, every quote starts from a clear cost floor. You can apply a deliberate margin rather than guessing what the market will bear.
• Setting hourly rates. If you are reviewing your rates for the first time or updating them after a period of cost increases, the overhead cost calculator gives you a defensible baseline. Rate increases are much easier to justify, both internally and to clients, when they are tied to documented cost movements rather than gut feel.
• Making hiring decisions. Before adding a new employee, run the true cost calculation for that role. The difference between a $70,000 salary and the total cost to the business, including all on-costs, equipment, and overhead allocation, can be $30,000 or more per year. Understanding that figure before committing to the hire is sound financial management.
• Budget planning and scaling operations. When planning growth, whether that means a new vehicle, a new team member, or opening a second location, every overhead addition changes your cost per billable hour. Recalculating after any significant change ensures your rates and margins keep pace with actual costs.

This is not a one-time calculation. Overhead changes as the business changes. Running it quarterly, or at a minimum annually, keeps your pricing grounded in current costs rather than figures that may be years out of date.

Check out this markup vs margin guide, which explains why using the wrong calculation method leads to consistent underpricing even when margins look healthy on paper.

Excel Template Vs Software: When Spreadsheets Stop Working

A spreadsheet is a fine starting point. It is free, flexible, and good enough to produce the core figures in this guide, especially if you are doing the calculation for the first time or running a small team.

The cracks show as the business grows. Costs change and the spreadsheet does not update itself. It has no connection to your live job data, so you cannot see whether the rates you set in January are still holding up in July. And when several people are quoting, there is no way to guarantee everyone is using the same figures.

Field service management software closes those gaps by linking costing, quoting, job management, and reporting in one platform. Overhead allocations live inside the system, so every quote reflects current costs automatically. Profitability reporting shows in real time whether jobs are tracking against what you priced.

Want to see what that looks like in practice? Check out this guide to estimating software for field service management

For a broader grounding, understand what field service management is as a starting point.

Bring Accurate Costing Into Your Workflow With Simpro

Simpro is field service management software built for trade businesses. It brings job costing, quoting, scheduling, and reporting together in one platform, so the overhead and labour calculations you have worked through in this guide become embedded in how your business actually operates.

Rather than updating rates and redistributing spreadsheets every time costs change, Simpro lets you set cost rates and overhead allocations directly in the system. Every quote your team generates draws from those figures automatically.

When a job is completed, actual costs are recorded against the quoted figures, giving you a clear view of where margins are holding and where they are not.

To see how Simpro handles overhead costing, job profitability, and quoting in practice, book a demo and a member of the team will walk you through the platform.

Frequently Asked Questions about Overhead Cost

What is a good overhead rate for small businesses?

There is no universal benchmark, as overhead rates vary significantly by trade, business size, and operating model. A sole trader with minimal fixed costs might run an overhead rate of 20–30%.

A business with a workshop, multiple vehicles, and a full administration team could sit at 50–70% or higher. The ATO small business benchmarks provide industry-specific ranges that can serve as a useful reference point.

The important thing is that the rate is calculated accurately and built into pricing, rather than estimated. A rate that reflects actual costs is always more useful than a low estimate that fails to cover real expenses.

How do you allocate overhead per employee?

The most common method is to divide total annual overhead by total annual billable hours across the team, producing an overhead cost per billable hour. That figure is then applied to each employee's hours.

For example, if your business has $150,000 in overhead and 5,000 billable hours, each hour carries a $30 overhead allocation. A technician who bills 1,200 hours in a year effectively absorbs $36,000 of overhead.

This approach ensures overhead is distributed proportionally based on actual productive output rather than headcount alone.

What's the difference between overhead and labour burden?

Labour burden refers specifically to the on-costs applied to wages: payroll taxes, superannuation, leave entitlements, and workers compensation. It is the gap between base salary and total employee cost.

Overhead is broader and covers all indirect business costs that cannot be attributed to a single job, including rent, vehicles, insurance, software, and administration.

Both need to be calculated and built into your hourly rate. Labour burden is factored into employee cost; overhead is then added on top of that to reach the fully burdened hourly rate.

For a detailed breakdown of labour burden specifically, the labour burden rate calculator guide covers every component and how to calculate each one accurately.