Effective labor rate calculator
Your effective labor rate is the labor money you actually collected divided by the hours you actually billed. Enter both and see how it compares to your posted rate.
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How it works
Your posted labor rate is what's on the board. Your effective labor rate (ELR) is what you really earn per billed hour after discounts, comebacks, free diagnostic time and jobs sold below book.
The gap between the two is money you are leaving on the table. Most shops find it by looking at a month of invoices: total labor sales divided by total billed hours.
Example: $42,000 of labor sales on 310 billed hours is an ELR of $135.48. With a posted rate of $150, that's about 90% of posted, so roughly $14.50 an hour is going somewhere.
Track this every month without a spreadsheet: Shop reports in Gearboxly.
Questions shops ask
What is a good effective labor rate?
It depends on your posted rate and market. The useful number is the percentage of posted: the closer to 100%, the less you are discounting. Track it monthly and watch the trend.
What lowers effective labor rate?
Discounts, free re-checks, comebacks done for free, diagnostic time not charged, and selling jobs below the published labor time.
Is ELR the same as gross profit per hour?
No. ELR is labor sales per billed hour. Gross profit per hour also counts parts profit and subtracts what labor costs you.
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