Many self-employed tradies in New Zealand set their charge-out rate based on what they think the market will bear — or worse, based on what mates charge. The result is often an hourly rate that looks solid on paper but leaves little in the bank after bills, tax, and a week off sick.
This guide walks you through the numbers so you can set a rate that actually works. We'll use a real example throughout: a sole-trader plumber in Auckland with five years of experience.
Why Most Tradies Undercharge
The core mistake is simple: people estimate their rate based on what an employed worker earns, then add a bit for being their own boss. But self-employment comes with a stack of costs that an employer normally covers:
- ACC levies (Earners' and Working Cover)
- KiwiSaver contributions (no employer match)
- All equipment, tools, and vehicle running costs
- Insurance (public liability, vehicle, income protection)
- Unpaid time: admin, quoting, travel, warranty callouts
- Tax set-asides (income tax and GST)
- Leave — you only earn when you're on the tools
Once you account for all of this, a sole trader needs to charge significantly more per billable hour than their employed equivalent earns.
Step 1: Define Your Target Take-Home Pay
Start with what you want to take home after tax each year. Be honest — this should cover your mortgage or rent, living costs, and something into savings.
Example: $85,000 net per year (roughly $1,635/week take-home)
For reference, IRD's tax rates for 2025–26 mean you'll need roughly $115,000–$120,000 in gross income to clear $85,000 after income tax and ACC earners' levy.
Step 2: Calculate Your Annual Overheads
List every cost of running your business for the year. Here's a realistic example for our Auckland plumber:
| Overhead Item | Annual Cost |
|---|---|
| Vehicle (running, WOF, registration, insurance) | $9,500 |
| Tools and equipment | $4,000 |
| Public liability insurance | $1,800 |
| Income protection insurance | $1,200 |
| Phone and broadband | $1,500 |
| Accountant / bookkeeping | $1,500 |
| Software (job management, invoicing) | $600 |
| Work clothing and PPE | $400 |
| Advertising and marketing | $500 |
| Sundry (stationery, bank fees, etc.) | $300 |
| Total overheads | $21,300 |
Use our job costing calculator to model your own overhead profile — it lets you enter fixed and variable costs and see how they affect your rate.
Step 3: Work Out Your Billable Hours
This is where many tradies get caught out. You might work 45 hours a week, but not all of those hours are billable. Time spent quoting, chasing invoices, driving to suppliers, doing admin, and handling warranty work is all unpaid.
A realistic billable-hour estimate for a sole trader:
- Total working weeks: 52
- Less: 4 weeks annual leave, 2 weeks sick/personal leave = 46 working weeks
- Weekly hours worked: 45
- Less non-billable time (25%): ~34 billable hours per week
Annual billable hours: 46 × 34 = 1,564 hours
If you track your time carefully, you may find your actual billable percentage is lower. A rough rule of thumb: sole traders typically bill 55–70% of total working hours.
Step 4: Add a Profit Margin
Your rate so far covers your take-home and your overheads — but it leaves nothing for growth, reinvestment, or the occasional bad debt. Add a profit buffer on top.
A minimum of 10–15% profit margin is recommended. For a growing business or one with significant capital needs, aim for 20%.
We'll use 15% in our example.
Step 5: Put It All Together
| Component | Amount |
|---|---|
| Target gross income (before tax) | $117,000 |
| Annual overheads | $21,300 |
| Subtotal | $138,300 |
| Profit margin (15%) | $20,745 |
| Total revenue needed | $159,045 |
Minimum charge-out rate: $159,045 ÷ 1,564 = $101.69/hour
Round up to $105/hour as your base rate. For specialised work, after-hours callouts, or jobs in remote areas, apply a premium on top.
For comparison, MBIE's construction sector data shows average hourly rates for plumbers in Auckland are running between $95–$130/hour in 2026, so this sits comfortably in the market range while actually covering costs.
Step 6: Factor in GST
If you're registered for GST (mandatory above $60,000 turnover — see our GST registration guide), your charge-out rate is exclusive of GST. You'll add 15% on top when invoicing.
So $105/hour + GST = $120.75/hour on the invoice.
Clients often ask for an "all-in" rate including GST. That's fine — just make sure it's clear on the invoice that the rate is GST-inclusive, so you can correctly remit $15.75 of every $120.75 to IRD.
Use our GST calculator to quickly check what's owed on any invoice.
Reviewing Your Rate Annually
Once you've set your rate, don't forget to revisit it at least once a year — ideally after the 31 March financial year-end. Key triggers to review sooner:
- ACC levy changes — ACC WorkSafe levies for tradespeople can shift year to year based on your industry classification code (check your annual ACC invoice carefully)
- Material cost inflation — if you're including materials in a daily or project rate, rising steel, copper, or timber prices eat into your margin
- Wage benchmarks — if employment wages in your trade are rising, your charge-out rate needs to rise too or you'll start losing workers to employment
- New overhead costs — apprentices, a second vehicle, new insurance requirements
See our article on managing rising material costs in NZ for strategies to protect your margin when input costs spike.
Using Software to Stay on Top of Your Numbers
Once you know your target rate, the next challenge is making sure every job actually hits that rate. That's where job management software earns its keep.
Fastcrew is built specifically for NZ tradies and includes time tracking against jobs, so you can see at a glance whether a job is trending over or under budget — before you're already in the hole. It integrates with Xero and MYOB so your actual hours feed directly into your invoicing.
Summary: Your Rate-Setting Checklist
- [ ] Set a realistic gross income target (remember to account for tax)
- [ ] List all annual business overheads honestly
- [ ] Estimate billable hours conservatively (55–70% of working hours)
- [ ] Add at least 10–15% profit margin
- [ ] Divide total revenue needed by billable hours
- [ ] Check against market rates (MBIE and trade associations publish benchmarks)
- [ ] Add GST on top for invoicing
- [ ] Review annually after March EOFY
Download our free NZ tradie templates at tradietools.nz/templates/ — including a charge-out rate calculator spreadsheet, an overhead tracker, and a job profitability worksheet.
NZ Tradie Tools provides free calculators, templates and guides for New Zealand tradies. Visit tradietools.nz.