Retainer vs Hourly Calculator NZ
This retainer vs hourly calculator compares a monthly retainer with billing the same work by the hour. It is written from the point of view of the person doing the work, but a client weighing up an offer can use it just as well. A retainer is a fixed monthly fee for an agreed block of hours. It gives you predictable income and the client a predictable cost, but your real hourly rate moves with the hours the client actually uses: in a quiet month the fee is spread over fewer hours and your rate rises, in a busy month it falls, and once the included hours run out any overage is billed at whatever rate you agreed. You enter the monthly retainer, the hours it includes, your normal hourly rate, the hours used in the month and the overage rate. The calculator gives the effective hourly rate the retainer pays, what the client pays in total, what the same hours would have cost billed hourly, the difference between the two and the break-even hours at which both cost the same. All amounts are excluding GST. The retainer, the included hours and the overage rate are commercial terms between you and your client, so try the hours of a quiet month and a busy one to see the range.
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
If the hours used are within the hours the retainer includes, the client pays the retainer and nothing more, and the effective hourly rate is the retainer divided by the hours used. If more hours are used, the extra hours are overage: the client pays the retainer plus the overage hours at the overage rate, and the effective rate is that total divided by all the hours used. The hourly comparison is simply the hours used at your normal rate. Break-even hours are the retainer divided by the normal hourly rate, the point at which a month on the retainer and a month billed hourly cost the client the same. Below break-even the retainer pays you more than hourly billing would, and between break-even and the included hours it pays less. Beyond the included hours, the comparison turns on the overage rate: the same rate as your normal one keeps the gap fixed, a higher one narrows it and can eventually reverse it. A positive difference means the retainer earned more this month; a negative one means hourly billing would have.
Worked example
A $4,000 monthly retainer includes up to 30 hours, the normal rate is $150 an hour and overage is also $150. In a month when the client uses 24 hours, the retainer pays $166.67 an hour, while the same 24 hours billed hourly would be $3,600.00, so the retainer earns $400.00 more. The break-even point is $4,000 divided by $150, or 26.67 hours. In a month that uses all 30 hours the retainer pays $133.33 an hour, and in a 36-hour month the 6 overage hours bring the bill to $4,900.00.
| Hours used | Client pays on the retainer | Same hours billed hourly | Effective rate on the retainer |
|---|---|---|---|
| 24 | $4,000.00 | $3,600.00 | $166.67 |
| 30 | $4,000.00 | $4,500.00 | $133.33 |
| 36 | $4,900.00 | $5,400.00 | $136.11 |
Related calculators
- Fixed Fee vs Hourly Calculator: the same comparison for a one-off job priced as a fixed fee.
- Fractional Executive Day Rate Calculator: a day rate and a monthly retainer from an equivalent salary.
- Client Hours Allocation Calculator: a week's hours split across several clients and their rates.
- Hourly Rate Calculator: the hourly rate your costs and income target need.
- Utilisation Rate Calculator: the share of your working hours that is billable.