Free Effective Hourly Rate (EHR) Calculator

Step 1: Fixed Contract Fee, Change Orders, Budgeted Hours, Scope Creep & Loaded Cost Burden

Project Scope & Pricing Parameters

💼 Contract Revenue & Hours

Fixed Base Contract Fee ($)

Approved Change Orders ($)

Budgeted Delivery Hours

Scope Creep Unbilled Hours

📉 Loaded Hourly Cost Burden

Loaded Labor Cost / Hour ($)

Allocated Overhead / Hour ($)

Total Burdened Cost / Hour: Direct Labor + Overhead. Target EHR = Base Fee / Budgeted Hours. Realized EHR = Total Revenue / Actual Delivered Hours.

Realized EHR

$169.23/hr

Target: $200.00/hr (Net Spread: $79.23/hr over $90.00 burdened cost)

Project Net Profit

$25.75K

46.8% Net Margin on $55.0K total revenue

Scope Creep Dilution

-15.4% Dilution

+75 Unbilled Creep Hours (+30% over budget)

Breakeven Delivery Limit

611 Max Hrs

286 hrs safety buffer remaining

Realization Matrix: Fixed Project Fee ($) vs. Scope Creep (+% Hours)

Simulates Realized Effective Hourly Rate ($/hr) and Project Net Margin (%) across fixed pricing and scope overages.

Contract Fee	+0% Creep (250h)	+15% Creep (288h)	+30% Creep (325h)	+50% Creep (375h)	+80% Creep (450h)

Professional Services Principles

Understanding Effective Hourly Rate (EHR)

Key agency and consulting financial principles governing fixed-fee profitability:

The Fixed-Price Paradox: Fixed-fee projects provide pricing certainty for clients, but transfer 100% of execution and timeline risk to the agency.
Scope Creep as Profit Killer: A 30% unbilled scope overrun reduces realized EHR significantly, often wiping out the entire expected agency margin.
The Power of Change Orders: Capturing even 50% of scope expansions through formal change orders preserves EHR and sets professional boundaries.
Loaded Cost Floors: Unbilled hours still incur direct payroll and overhead costs. Tracking breakeven delivery hours prevents disastrous loss-leader engagements.

Evaluate firm billable utilization in the Billable Utilization Lab.

Mathematical Formulation

EHR & project margin equations

Target_EHR = Fixed_Base_Fee / Budgeted_Hours

Total_Revenue = Fixed_Base_Fee + Approved_Change_Orders

Total_Delivered_Hours = Budgeted_Hours + Scope_Creep_Hours

Realized_EHR = Total_Revenue / Total_Delivered_Hours

EHR_Dilution_% = [ ( Target_EHR - Realized_EHR ) / Target_EHR ] × 100

Project_Net_Profit = Total_Revenue - [ Total_Hours × ( Labor_Cost + Overhead ) ]

Breakeven_Hours = Total_Revenue / Total_Loaded_Cost_Burden

Model consulting firm leverage pyramids in the Consulting Leverage Lab.

FAQ

Effective hourly rate questions

What is Effective Hourly Rate (EHR)?

Effective Hourly Rate (EHR) is the actual revenue earned per hour of work delivered on a fixed-fee or value-priced project: Realized EHR = Total Project Revenue / Total Actual Hours Worked.

How does scope creep dilute agency EHR and profit?

When a project exceeds its budgeted hours due to unbilled revisions or client changes without change orders, the fixed revenue is divided across more hours, reducing realized EHR and compressing profit margins.

What is loaded hourly cost in professional services?

Loaded hourly cost includes the base hourly wage plus payroll taxes, healthcare, fringe benefits, and allocated firm overhead (office, software, utilities, admin). EHR must comfortably exceed this loaded rate to produce net profit.

How can agencies protect against EHR dilution?

Firms protect EHR by establishing strict scope boundaries, requiring signed change orders for out-of-scope requests, tracking real-time delivery hours, and pricing buffer contingency into fixed proposals.

Can I export the EHR and scope creep audit to CSV?

Yes. You can export complete project fee breakdowns, scope creep dilution rates, net profit margins, breakeven hours, and 6x5 sensitivity tables as a UTF-8 CSV spreadsheet with formula defense.

Continue Exploring Professional Services Tools

Explore our Service Business Hub, calculate realization rates in the Realization Rate Lab, analyze retainer vs. T&M in the Retainer Pricing Lab, optimize billable rates in the Billing Multiplier Lab, or calculate firm leverage in the Consulting Leverage Lab.