Article Contents
Introduction
In Hiro, there are two types of hourly rates that help you manage staff costs and billing:
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Cost Rate: The real cost to the business of employing someone
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Charge Rate: The rate you use to charge out their time on projects
Understanding the difference between these two is important for setting fees, tracking job performance, and staying profitable.
What goes into the Cost Rate?
The cost rate is the actual cost to your business of employing someone, calculated per billable hour.
That part is important. Even though you pay someone for all their time, not all of it can be billed to clients. The cost rate is worked out by dividing the total annual cost of employing them by the number of billable hours you expect them to deliver in a year.
This gives you a more accurate cost per billable hour by accounting for leave, public holidays, internal meetings, admin time and other non-billable duties.
A typical cost rate includes:
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Wages or salary
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Superannuation
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Leave entitlements (e.g. annual, sick, public holidays)
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Non-billable time (e.g. internal meetings, training, admin)
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Business overheads
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Office rent
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Insurance
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Software subscriptions
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Equipment
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Support staff (e.g. reception, HR, accounts)
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In short, the cost rate covers everything it costs to have that person on staff, spread over the hours you can realistically recover from clients.
What gets added to make a Charge Rate?
The charge rate builds on the cost rate. It is the amount you assign to a project for each hour of work logged by that person.
To calculate a charge rate, you start with the cost rate and then add:
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A profit margin
So your business earns more than just what it costs to deliver the work -
Market considerations
You might adjust the charge rate based on what similar services cost in your industry
Most businesses set a standard charge rate per role (such as Project Manager or Field Technician) rather than per person, to keep pricing consistent and manageable.
Next Steps
We’ve created a step-by-step walkthrough that guides you through the full process of calculating charge rates, including how to factor in billable hours and overheads:
👉 Charge Out Rate Calculator
Once you have your charge rates worked out, you can load them into Hiro so they apply automatically when timesheets are entered. For step-by-step instructions, see: