Rate Increase Break-Even Calculator NZ
This rate increase break-even calculator answers the question every contractor and freelancer has to settle before raising their rates: how much work could I lose before the rise leaves me worse off? A higher rate earns more on every hour you keep, but some clients may cut back their hours or leave, and the question is which effect is bigger. The answer is always a little less than the rise itself, because the higher rate applies only to the hours that remain. You enter your current hourly rate, the billable hours you work in a typical week, the rise you are thinking about and the share of your hours you expect to lose as a result. The calculator gives you the break-even loss, which is the most you could lose and still earn exactly what you earn now, your new hourly rate, and your weekly revenue before and after the rise at the loss you expect. The expected loss is your own estimate, not a prediction, so try a few figures to see how wide the range of outcomes is. The page compares revenue only: any hours you free up could be sold to a new client at the higher rate, or used for something else, and that would only add to the case for the rise.
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
Your weekly revenue now is your rate times your billable hours. After the rise, your rate is multiplied by one plus the rise, and your hours are reduced by the share you expect to lose, so weekly revenue after the rise is the new rate times the hours you keep. The break-even loss is the share of hours at which those two figures are equal: one minus one divided by one plus the rise. It depends only on the size of the rise, not on your rate or your hours, so a 10% rise breaks even at a 9.1% loss whatever your rate. The change a week is revenue after the rise less revenue now, at the loss you entered. All figures exclude GST.
Worked example
A contractor charges $100 an hour for 30 billable hours a week, $3,000.00 a week. She is thinking of a 10% rise to $110.00 an hour and expects to lose 5% of her hours, leaving 28.5 hours. At $110.00 those hours bring in $3,135.00 a week, $135.00 more than now. The break-even is 1 - 1 / 1.1, a loss of 9.1%, which is 30 / 1.1 or 27.27 hours a week. Her expected loss of 5% is well inside that, so on these figures the rise pays even if she loses more work than she expects.
| Line | Now | After the rise |
|---|---|---|
| Rate per hour | $100.00 | $110.00 |
| Billable hours a week | 30 | 28.5 |
| Weekly revenue | $3,000.00 | $3,135.00 |
| Break-even hours, 30 / 1.1 | 27.27 | |
| Break-even loss | 9.1% |
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