Should I charge by the hour or by the job?

Many shops quote fixed prices for common jobs and hourly for diagnostics. Either way, build the price from a labour rate you have calculated.

Do labour rates include GST?

Set and quote your rate ex GST internally, and show GST clearly on the customer invoice.

Guide

How to price labour in a mechanic workshop

Your labour rate has to pay wages, rent, tools, software and you, from the hours you actually bill. Most shops set it by copying the shop down the road. Here is a better method.

Step 1: add up your true costs

Total your monthly overheads (rent, power, insurance, software, tools, vehicles, admin) and the full cost of each technician (wages, super, leave loading, workers comp).

Step 2: work out billable hours

A technician paid for 38 hours is rarely billing 38. Allow for cleaning, waiting on parts, comebacks, training and leave. Track quoted versus actual hours for a month to find your real productive rate.

Step 3: add your margin and GST

Divide total costs by billable hours to get your break-even rate, then add the profit margin you need. Quote ex-GST rates consistently and add GST on the invoice.

Our free labour rate calculator does this maths for you.

Step 4: protect the rate on every job

Use job templates for common work so the labour time is consistent.
Record actual time on the job card and compare it with the quote.
Check for missed parts and labour before invoicing.
Review your rate every six months, or when wages or rent change.

FAQ

Should I charge by the hour or by the job?: Many shops quote fixed prices for common jobs and hourly for diagnostics. Either way, build the price from a labour rate you have calculated.
Do labour rates include GST?: Set and quote your rate ex GST internally, and show GST clearly on the customer invoice.

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