How to include your own labour in job costs
Learn why contractor owner labour belongs in job costs and how to choose a practical hourly cost without counting the same money twice.
In short
Your time is a job cost even when you do not run payroll for yourself. Assigning an hourly cost to owner labour separates compensation for doing the work from the profit earned by owning and pricing the business.
Why owner labour cannot be free
A solo contractor can finish a job with cash left over and still underprice it. If the calculation subtracts materials but treats ten hours of skilled labour as free, the remaining cash is doing two jobs at once: paying you for the work and pretending to be business profit.
Counting owner labour creates a cleaner question: after the business paid a reasonable cost for your working time, what did the job earn beyond that?
Choose an hourly cost, not a customer billing rate
The owner hourly cost is an internal planning number. It is not necessarily what you charge the customer. A billing rate may also need to cover overhead, unbillable time, risk, and profit.
A practical starting point is the hourly compensation the business needs to support for your field work. Some contractors begin with a replacement wage: what it would reasonably cost to pay a qualified person to perform the same work. Your accountant can help refine the number for payroll burden and business structure.
- Use one consistent starting rate so jobs remain comparable.
- Review it when wages, insurance, or business needs materially change.
- Do not change the rate after a bad job just to make the result look better.
- Keep general overhead separate unless your chosen job-costing method deliberately allocates it.
Calculate owner labour for the job
Multiply the time spent on the job by the owner hourly cost. Include the human time that the job actually consumed: on-site work, job-specific pickup, and callback work when you want those activities reflected in the result.
Owner labour cost
owner hours × owner hourly cost
Three hours at a $45 hourly cost adds $135 to the job's direct cost.
A simple comparison
Consider a $680 job with $226.72 in materials, travel, and card fees. Ignoring three hours of owner labour makes profit look like $453.28. Including $135 of owner labour shows $318.28 of profit after the working time has been costed.
| View | Profit shown | What it means |
|---|---|---|
| Owner time ignored | $453.28 | Cash left before assigning any cost to your work |
| Owner time costed | $318.28 | Profit remaining after $135 of owner labour |
Avoid double-counting your time
Once owner labour is included as a direct cost, do not subtract the same time again under another labour line. Likewise, do not describe the resulting business profit as the owner's hourly wage; the labour allowance and profit are deliberately separated.
JobMargin Pro calls the final time comparison effective hourly return: profit divided by total human hours. It helps compare the performance of jobs, but it is not a payroll rate or a promise that every hour of profit is personal take-home pay.
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