How to Calculate Labour Costs for Construction Jobs — Complete Guide

Labour is typically the single largest cost on any construction job. Get it wrong and you either lose the job by pricing too high, or win it and wish you had not because you are working for pennies. Yet many tradespeople still calculate labour costs by gut feel rather than a proper method.

This guide walks you through exactly how to calculate labour costs for construction work in the UK — whether you are a sole trader pricing a bathroom fit or a small building firm quoting a house extension. We will cover the different pricing models, how to account for overheads and profit, and work through real example calculations you can adapt to your own business.

Why Accurate Labour Calculations Matter

Underestimating labour costs is one of the most common reasons trade businesses struggle financially. You might be winning plenty of work, but if your labour calculations are off by even ten or fifteen per cent on every job, you are slowly bleeding money. Over the course of a year, that adds up to thousands of pounds in lost income.

Accurate labour calculations also give you confidence when presenting your price to a customer. When you know exactly how you arrived at your figure, you can explain it clearly and justify it if challenged. Customers respect tradespeople who can break down their pricing — it builds trust and makes them more likely to accept your quote.

Hourly Rate vs Day Rate vs Fixed Price

Before you can calculate labour costs for a specific job, you need to understand the three main pricing models and when to use each one.

Hourly Rate

Charging by the hour works well for small jobs, call-outs, and repair work where you cannot predict exactly how long the job will take. Typical hourly rates for UK tradespeople in 2026 range from twenty-five to fifty pounds per hour, depending on your trade, location, and experience level. Specialist trades like gas engineers and electricians tend to charge at the higher end.

The downside of hourly rates is that customers can feel anxious about an open-ended bill. To manage this, give an estimated range of hours before you start. For example, tell the customer you expect the work to take three to four hours, so they have a rough idea of the total cost.

Day Rate

Day rates are the standard for construction work where you are on site for a full day or multiple days. In 2026, average day rates for UK construction trades look roughly like this:

• General labourer: one hundred to one hundred and forty pounds per day
• General builder: one hundred and fifty to two hundred and fifty pounds per day
• Bricklayer: one hundred and eighty to two hundred and sixty pounds per day
• Carpenter or joiner: one hundred and sixty to two hundred and forty pounds per day
• Plasterer: one hundred and fifty to two hundred and thirty pounds per day
• Electrician: one hundred and eighty to two hundred and eighty pounds per day
• Plumber: one hundred and seventy to two hundred and sixty pounds per day
• Roofer: one hundred and seventy to two hundred and fifty pounds per day

These figures vary significantly by region. London and the South East command the highest rates, while rates in the North of England, Wales, and Scotland tend to be lower. Always research your local market rather than relying on national averages.

Fixed Price

For defined projects — a kitchen installation, a bathroom refit, an extension — customers overwhelmingly prefer a fixed price. They want to know exactly what they will pay before work starts. Fixed pricing requires you to estimate your labour accurately upfront, which means you need a good understanding of how long each task takes. If you are new to a particular type of work, keep detailed time records on your first few jobs so you can price more accurately in future.

Step-by-Step Labour Cost Calculation

Here is the method that works regardless of which pricing model you use. It ensures you cover your wages, your overheads, and your profit on every job.

Step 1: Calculate Your Base Labour Rate

Start with what you want to take home personally each year. Be realistic — look at what employed tradespeople in your trade earn and aim to at least match that, because you are taking on significantly more risk and responsibility as a self-employed person.

For example, if you want to take home forty thousand pounds per year, that is your starting point. But you will not work every day of the year. Once you deduct weekends, bank holidays, two to three weeks of annual leave, and the inevitable sick days and quiet periods, most sole traders have around two hundred and twenty billable days per year.

Forty thousand pounds divided by two hundred and twenty days gives you a base day rate of approximately one hundred and eighty-two pounds. That is the minimum you need to charge per day just to cover your personal income — before overheads and profit.

Step 2: Add Your Overheads

Your overheads are all the costs of running your business that are not tied to a specific job. Common overheads for construction tradespeople include:

• Van finance, insurance, tax, and maintenance — typically three thousand to six thousand pounds per year
• Fuel — two thousand to four thousand pounds per year depending on mileage
• Public liability and other business insurance — five hundred to one thousand five hundred pounds per year
• Tool purchases and repairs — one thousand to three thousand pounds per year
• Phone and internet — five hundred to eight hundred pounds per year
• Accounting fees — five hundred to one thousand two hundred pounds per year
• Software subscriptions — two hundred to six hundred pounds per year
• Workwear and PPE — two hundred to five hundred pounds per year
• Marketing and advertising — five hundred to two thousand pounds per year
• Trade body memberships — two hundred to six hundred pounds per year

Let us say your total annual overheads come to twelve thousand pounds. Divided by two hundred and twenty billable days, that is approximately fifty-five pounds per day in overheads.

Your labour rate is now one hundred and eighty-two pounds (base) plus fifty-five pounds (overheads) = two hundred and thirty-seven pounds per day.

Step 3: Add Your Profit Margin

Profit is separate from your wages. It is the return on the risk of running a business, and it allows your business to grow, invest in equipment, and build a financial buffer for quiet periods. A healthy profit margin for a construction business is typically ten to twenty per cent on top of your total costs.

Taking our example, a fifteen per cent profit margin on two hundred and thirty-seven pounds gives you approximately thirty-six pounds. Your all-in day rate is now two hundred and seventy-three pounds.

This is your true cost of a day's labour. Every time you price a job, this is the figure you should be working from — not a number you plucked from thin air because it felt about right.

Step 4: Estimate the Time Required

Now you need to work out how many days (or hours) the specific job will take. This is where experience counts. If you are pricing a job you have done many times before, you will have a good instinct for how long it takes. If it is a type of work you have not done often, break it down into individual tasks and estimate each one separately.

For a bathroom installation, for example, you might break it down like this:

• Strip out existing bathroom — one day
• First fix plumbing — one day
• First fix electrics (subcontractor) — half a day
• Boarding and waterproofing — one day
• Tiling — two days
• Second fix plumbing — one day
• Second fix electrics (subcontractor) — half a day
• Fitting sanitaryware — half a day
• Finishing and snagging — half a day

That gives you eight days of your own labour. At two hundred and seventy-three pounds per day, your labour cost for the job is two thousand one hundred and eighty-four pounds.

Step 5: Account for Additional Labour

If you need a labourer, apprentice, or subcontractors on the job, add their costs separately. For employed staff, remember to include not just their wages but also employer's National Insurance, pension contributions, and any other employment costs. For subcontractors, use the rate they quote you and add a markup of ten to fifteen per cent if you are managing them and taking responsibility for their work.

Step 6: Add Contingency

Construction jobs almost never go exactly to plan. Allow a contingency of ten to fifteen per cent on your labour estimate to cover unexpected complications, delays, and additional work that only becomes apparent once you start. For straightforward jobs you have done many times, ten per cent is usually sufficient. For more complex or uncertain work, lean towards fifteen per cent or even twenty per cent.

Example Calculation: Full Kitchen Installation

Let us work through a complete example. You are quoting for a full kitchen installation including strip-out, plastering, electrics, plumbing, fitting the kitchen units, tiling, and flooring.

Your labour (at two hundred and seventy-three pounds per day):

• Strip out — one and a half days = four hundred and ten pounds
• Plastering — two days = five hundred and forty-six pounds
• First fix plumbing and electrics — one and a half days = four hundred and ten pounds
• Kitchen unit fitting — three days = eight hundred and nineteen pounds
• Worktop fitting — one day = two hundred and seventy-three pounds
• Tiling — two days = five hundred and forty-six pounds
• Second fix plumbing and electrics — one day = two hundred and seventy-three pounds
• Flooring — one day = two hundred and seventy-three pounds
• Finishing — half a day = one hundred and thirty-seven pounds

Total own labour: three thousand six hundred and eighty-seven pounds

Subcontractor (electrician, two days): five hundred pounds

Contingency (twelve per cent): five hundred and two pounds

Total labour cost for the job: four thousand six hundred and eighty-nine pounds

This would then be added to your material costs to form the complete job price. For more on structuring the full quote, see our guide on what to include in a building quote.

Common Mistakes When Calculating Labour Costs

These are the errors we see most often, and each one directly eats into your profits.

Not accounting for unbillable time. Travel to and from site, collecting materials, dealing with customer queries, and admin all take time that you cannot bill for directly. Your day rate needs to be high enough to cover these hours, which is why dividing your target income by three hundred and sixty-five days gives you a completely unrealistic rate.

Forgetting overheads. If your day rate only covers your wages, you are effectively subsidising every job with your own money. Every cost of running your business needs to be recovered through your pricing.

Underestimating job duration. Optimism bias is real. If you think a job will take three days, price it for three and a half. If you have never done that type of job before, add even more buffer. You can always return some money to the customer if the job goes faster than expected — you cannot easily ask for more if it takes longer.

Not reviewing your rates annually. Costs go up every year — fuel, insurance, materials, living expenses. If you do not review and adjust your rates at least once a year, you are effectively giving yourself a pay cut.

Pricing to match competitors rather than your costs. Your competitor might have lower overheads, different personal income needs, or simply be pricing incorrectly. Always start with your own costs and work outward. If your calculated rate is significantly higher than the market, look for ways to reduce your overheads or increase your efficiency — do not just drop your price and accept lower margins.

Tips for More Accurate Labour Estimates

Keep a time log. For at least six months, record how long every task takes you. Over time, you will build a personal database of how long different types of work take, which makes your estimates far more accurate.

Break jobs into tasks. Never estimate a whole job as one number. Break it into individual tasks and estimate each one. The errors tend to cancel out, and you are less likely to forget something.

Factor in drying and curing times. Plastering, tiling adhesive, floor levelling compound, and paint all have drying times. If you cannot work on other tasks while waiting, these periods need to be included in your labour calculation.

Consider site conditions. Working in a cramped loft, a narrow terrace house, or a property with no parking will all slow you down. Adjust your time estimates for difficult access or awkward working conditions.

Review completed jobs. After every job, compare your estimated labour time against the actual time taken. Where you were off, understand why. This feedback loop is how you get better at pricing over time.

Presenting Labour Costs to Customers

How you present your labour costs matters. Most customers do not want to see a day rate — they want to see a clear price for the completed job. However, being transparent about your pricing builds trust.

For fixed-price quotes, present a single labour figure or include it within an overall job price. For day rate work, explain your rate clearly upfront and give the customer an estimated number of days. Either way, put it in a professional, well-structured document rather than a text message or verbal quote.

Tools like QuoteSmith make this straightforward. Enter your line items and costs, and the AI generates a branded PDF proposal with a clear scope of work, timeline, and terms. It presents your pricing professionally, which helps justify your rates and win more work.