Fixed Fee vs Hourly Calculator NZ
This fixed fee vs hourly calculator prices a job as a fixed fee from your own estimate of the hours, then shows what that fee actually pays per hour once you know how long the job took. A fixed fee suits a client who wants certainty about the price, and it can reward you for working efficiently, but the risk of an overrun sits with you: every hour beyond the estimate lowers your effective rate, while billing by the hour would have charged for each one of them. Adding a contingency to the estimate absorbs some of that risk, and how much to add is your own judgement about the job, its scope and the client. You enter your estimate of the hours, your hourly rate, the contingency as a percentage and the hours the job actually took, or the hours you think it might take. The calculator gives the fixed fee, your effective hourly rate at the actual hours, what hourly billing would have charged for the same hours, the difference between the two and the break-even hours at which the fee and hourly billing are equal. All amounts are excluding GST. Run it before you quote, to see how far a job can overrun before the fee pays less than your rate, and again at the end to see how the estimate held up.
From the same team as Calculate.co.nz
Your Timesheets at jobtracker.co.nz logs your hours on a week grid or a timer that keeps counting when your phone locks, free on every plan. Career and Timesheets turns those hours into projects and rates, fixed fees and retainers, numbered invoices with GST only when you are registered, expenses and mileage, and the tax to set aside, from $4.99 a month billed yearly.
Log your hours freeHow it works
The fixed fee is the estimated hours multiplied by your hourly rate, then increased by the contingency percentage. Your effective hourly rate is that fee divided by the hours the job actually took. Hourly billing is the actual hours at your normal rate, which is what the client would have paid had you charged by the hour instead. The difference is the fixed fee less hourly billing: positive when the fee paid more, negative when the job ran long enough that hourly billing would have paid more. Break-even hours are the fee divided by your rate. A job finished in exactly the break-even hours pays your normal rate whichever way it was priced, so the gap between the estimate and break-even is the overrun the contingency covers.
Worked example
You estimate a job at 40 hours and charge $130 an hour, so the base price is $5,200. A 15% contingency adds $780, and you quote a fixed fee of $5,980.00. Had the job taken the estimated 40 hours, the fee would have paid $149.50 an hour. It took 48 hours instead, so the fee pays $124.58 an hour. Billed by the hour, 48 hours at $130 would have been $6,240.00, which is $260.00 more than the fixed fee. The fee breaks even with hourly billing at 46 hours, so the contingency covered the first 6 hours of the 8-hour overrun.
| Line | Amount |
|---|---|
| 40 estimated hours at $130 | $5,200.00 |
| Contingency at 15% | $780.00 |
| Fixed fee | $5,980.00 |
| Effective rate over 48 actual hours | $124.58 |
| Hourly billing, 48 hours at $130 | $6,240.00 |
| Fixed fee short of hourly billing by | $260.00 |
| Break-even hours, $5,980.00 divided by $130 | 46.00 |
Related calculators
- Retainer vs Hourly Calculator: the same comparison for a monthly retainer.
- Project Budget Burn Calculator: track a time and materials budget while the job is under way.
- Tradie Job Quote Calculator: a quote built from labour, materials, markup and GST.
- Realisation Rate Calculator: how much of your standard rate you actually bill and collect.
- Hourly Rate Calculator: the hourly rate your costs and income target need.