If you ask most field service business owners how they set their labour rate, they’ll describe some version of the same process: they looked at what competitors were charging, took something close to that figure, and called it a day.
The problem is that what competitors charge tells you nothing about whether those competitors are profitable. A lot of them aren’t.
Pricing from gut feel or market comparison means you might be covering costs, or you might be quietly subsidising every job you do. The only way to know is to build your rate from the ground up, starting with what an engineer actually costs you per hour and working forward to a price that covers everything and still leaves margin.
Table of Contents:
- Why most hourly rates are wrong
- Step 1 — Calculate the true cost of an engineer’s wages
- Step 2 — Add the van and fuel
- Step 3 — Add overheads that aren’t the engineer or the van
- Step 4 — Work out your real billable hours
- Step 5 — Calculate your break-even rate
- Step 6 — Add your profit margin
- A worked example: one engineer, full year
- What the market is actually charging
- How to use your rate in practice
- Frequently asked questions
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Why most hourly rates are wrong
Most business owners think of their engineer cost as salary plus maybe a van. The actual picture is more complicated.
On top of the salary, you’re paying employer’s National Insurance at 15% on most of the wage (from April 2025, on anything above £5,000 per year), making pension contributions, and covering 28 days of holiday during which no billable work happens. Add sick pay, training days, and any time spent travelling between jobs rather than working on them.
Then there’s the van: not just fuel, but insurance, road tax, servicing, MOT, tyres, and depreciation. A typical field service van costs between £8,000 and £12,000 per year once you account for all of it.
Add tools and equipment, public liability insurance, employers’ liability insurance, software, admin time, and a share of any office or storage costs, and the number gets much bigger.
If you’re only thinking about salary and fuel, you’re almost certainly undercharging.
Step 1 — Calculate the true cost of an engineer’s wages
Start with gross salary
Field service engineer salaries in the UK currently sit around £30,000 to £38,000 per year, based on ONS ASHE 2025 data. Experienced gas engineers and HVAC specialists often sit higher, at £38,000 to £45,000. Use your actual figure for this exercise. For the worked example later, we’ll use £34,000, which is roughly the market midpoint.
Add employer’s National Insurance
From April 2025, employer NIC is 15% on earnings above £5,000 per year (the Secondary Threshold dropped from £9,100 to £5,000 under the October 2024 Budget changes).
For an engineer on £34,000:
- Earnings subject to NIC: £34,000 − £5,000 = £29,000
- Employer NIC: £29,000 × 15% = £4,350
If your business has fewer than four or five employees and qualifies for the Employment Allowance (now £10,500 from April 2025, with the previous £100,000 eligibility cap removed), you can offset some of this against your NIC bill. It’s still a real cost per engineer, and it needs to be in the calculation.
Add pension contributions
Auto-enrolment requires a minimum employer contribution of 3% on qualifying earnings. Qualifying earnings for 2025/26 are those between £6,240 and £50,270 per year.
For an engineer on £34,000:
- Qualifying earnings: £34,000 − £6,240 = £27,760
- Employer pension at 3%: £27,760 × 3% = £833
Many employers contribute more than the minimum; 4% or 5% is common as a retention incentive. Use your actual rate.
Add holiday pay
UK employees are entitled to 5.6 weeks of paid annual leave, which works out to 28 days for a five-day worker. That’s 28 days of wages being paid while no billable work is happening.
For an engineer on £34,000:
- Daily cost: £34,000 ÷ 260 working days = £130.77 per day
- 28 days’ holiday pay: 28 × £130.77 = £3,662
This isn’t additional money on top of the salary; it’s already inside the salary figure. But it matters because it reduces the number of days you can charge a client for that engineer’s time. We’ll come back to this in Step 4.
Add sick pay provision
From April 2026, Statutory Sick Pay is payable from day one of illness. The three-day waiting period is gone, and the lower earnings limit has been removed. SSP in 2026/27 is £123.25 per week.
For budgeting purposes, you should assume a realistic level of absence. The UK average for sick days across all industries is around 5 to 7 days per year. Field service work, particularly trades involving physical labour and outdoor conditions, tends to run higher. A provision of 5 to 6 sick days per engineer per year is prudent.
At £130.77 per day, 5 days works out to approximately £654 per year, though much of this is offset by the SSP payment itself. For practical purposes, build in a sick pay buffer of around £500 to £700 to cover any excess above SSP and the cost of reshuffling jobs when engineers are out.
Full employment cost summary (wages element)
| Cost component | Annual amount |
|---|---|
| Gross salary | £34,000 |
| Employer NIC (15% above £5,000) | £4,350 |
| Employer pension (3% on qualifying earnings) | £833 |
| Sick pay provision | £600 |
| Total wage cost per engineer | £39,783 |
Step 2 — Add the van and fuel
A field service van is not just a fuel cost. It’s a commonly underestimated part of the calculation, and in most businesses it’s the second-largest cost after wages.
Purchase or finance cost / depreciation
Whether you own or lease, you need to spread the vehicle cost across the year. A mid-range workhorse (a Ford Transit Custom, Volkswagen Transporter, or similar) costs roughly £28,000 to £38,000 new. Over a four-year replacement cycle, you lose perhaps £5,000 to £8,000 per year in depreciation depending on spec and condition at resale. On a lease, the monthly payment does this calculation for you; a typical mid-range van lease runs £350 to £550 per month including VAT, or roughly £4,200 to £6,600 per year net of VAT.
For this exercise, use £5,500 as an annual depreciation or equivalent lease cost.
Van insurance
Commercial van insurance for a field service vehicle, covering tools in transit, business use, and the usual risks, costs between £1,200 and £1,800 per year for a named driver with a clean record. Fleet policies reduce this once you have three or more vehicles.
Use £1,400 as a working figure.
Road tax (Vehicle Excise Duty)
For light goods vehicles (vans up to 3,500kg gross), the flat annual rate is £320.
Servicing and maintenance
This includes scheduled services, tyres (a set of four commercial van tyres costs £400 to £600), MOT (maximum £58.60 for a van up to 3,000kg), brakes, wiper blades, and unscheduled repairs. A reasonable budget is £800 to £1,200 per year for a vehicle in normal field service use, call it £1,000.
Fuel
Fuel is the most variable cost and already covered in detail in the Fieldmotion fuel costs article. For a typical field service engineer travelling 20,000 miles per year in a diesel van at 185p per litre and around 40mpg, the annual fuel bill is roughly £2,100 to £2,600. Use £2,400 as a baseline, and adjust based on your territory size.
Van costs summary
| Cost component | Annual amount |
|---|---|
| Depreciation / lease equivalent | £5,500 |
| Insurance | £1,400 |
| Road tax | £320 |
| Servicing, tyres, maintenance | £1,000 |
| Fuel (20,000 miles at 185p/litre, ~40mpg) | £2,400 |
| Total van cost per engineer | £10,620 |
Step 3 — Add overheads that aren’t the engineer or the van
Every engineer carries a share of the overhead costs of running your business. These need to be allocated per engineer and loaded into the rate.
Overhead costs to allocate include:
- Insurance (not the van). Public liability insurance for a multi-engineer field service business covering £2 million of liability runs £800 to £2,000 per year depending on turnover and trade. Employers’ liability insurance, required by law if you have employees, typically costs £1,000 to £2,500 per year for a team of five to ten. Combined, allow £400 to £600 per engineer per year once spread across the team.
- Tools and equipment. A working set of hand tools, test equipment, and trade-specific gear for a field engineer costs £1,500 to £3,000 to replace, and depreciates over four to five years. That’s £300 to £600 per year per engineer before any specialist equipment.
- Training and certifications. Gas Safe registration renewal, F-Gas certification, NICEIC or NAPIT accreditation, first aid refreshers, and trade-specific CPD. Budget £300 to £600 per engineer per year, more for specialisms requiring annual recertification.
- Software and systems. Field service management software (like Fieldmotion), accounting software, job costing tools, and mobile data allowances. This typically costs £100 to £300 per engineer per month, or £1,200 to £3,600 per year, depending on the platform and your license model.
- Admin and office costs. If you have office staff, a premises, or back-office overhead, this needs apportioning too. For a business with one admin person supporting five engineers, their salary and associated costs need to be divided across those five engineers. For this exercise, we’ll assume back-office overhead averaging £2,000 per engineer per year. Adjust for your own setup.
Overhead cost summary per engineer
| Cost component | Annual amount |
|---|---|
| Insurance (PL + EL, apportioned) | £500 |
| Tools and equipment depreciation | £400 |
| Training and certifications | £400 |
| Software and systems | £1,800 |
| Admin and office overhead | £2,000 |
| Total overhead per engineer | £5,100 |
Step 4 — Work out your real billable hours
Most businesses get this wrong. They assume 40 hours a week, 52 weeks a year equals 2,080 billable hours. That figure is completely unrealistic.
Start with the working year
A standard working year at 40 hours per week and 52 weeks is 2,080 hours. But immediately subtract:
- 28 days’ statutory holiday: 28 × 8 hours = 224 hours
- Bank holidays (if paid and not included in the 28 days): typically 8 days = 64 hours
- Sick days (5-day realistic budget): 5 × 8 hours = 40 hours
- Training days: 2 to 3 days per year = 16 to 24 hours
That leaves approximately 1,728 to 1,736 hours of time the engineer is actually at work during the year.
Now subtract non-billable working time
Not every hour an engineer is at work generates a billable charge to a customer. Time that typically cannot be invoiced includes:
- Travel between jobs (not always included in the customer charge)
- Collecting parts or returning to depot
- Completing job sheets, paperwork, and admin
- Pre-job briefings or tool checks
- Attending quote visits that don’t convert
- Time on aborted or rescheduled jobs
For a well-organised business with strong scheduling, route planning, and digital job management, a realistic billable utilisation rate is 65% to 75% of available working hours. For less organised operations, it can drop below 60%. Field service software consistently reduces non-billable time: less travel between jobs, no depot runs to collect paperwork, same-day digital job completion. But even with good systems, 70% is a strong, realistic target.
At 70% utilisation of 1,730 available hours:
1,730 × 0.70 = 1,211 billable hours per engineer per year
That’s the realistic productive output you’re working with when setting prices. Many businesses that assume 2,080 billable hours are overstating their capacity by more than 70% before they’ve considered a single cost.
Step 5 — Calculate your break-even rate
Now add up all the annual costs for one engineer:
| Cost element | Annual total |
|---|---|
| Total wage cost | £39,783 |
| Total van cost | £10,620 |
| Total overhead | £5,100 |
| Total cost per engineer per year | £55,503 |
Divide by the realistic billable hours:
£55,503 ÷ 1,211 hours = £45.83 per billable hour
This is your break-even rate: the minimum you need to charge for each billable hour simply to cover costs. At this rate, you are earning nothing.
Most business owners would be surprised how high this floor is before they’ve added a single penny of profit.
Step 6 — Add your profit margin
Breaking even is not a business. You need to charge above this floor to fund growth, handle unexpected costs, invest in equipment, cover quiet periods, and actually reward yourself and your shareholders for the risk of running the business.
A sensible profit margin for a field service business is 15% to 25% on labour. The lower end is appropriate in highly competitive, price-sensitive markets. The higher end is achievable when you’re differentiated, well-reviewed, and operating efficiently.
Adding a 20% net margin to a £45.83 break-even rate:
£45.83 ÷ (1 − 0.20) = £57.29 per hour
Round this to £55 to £60 per hour as a starting point for a standard field service hourly rate for a single engineer in most UK markets outside London.
This calculation tells you what you need to charge, not what you should quote on every job. Materials, call-out fees, and complexity all sit on top of this floor.
A worked example: one engineer, full year
Here’s the full picture for a mid-market field service business with one engineer on £34,000 gross salary.
| Category | Cost |
|---|---|
| Gross salary | £34,000 |
| Employer NIC | £4,350 |
| Employer pension (3%) | £833 |
| Sick pay provision | £600 |
| Van depreciation/lease | £5,500 |
| Van insurance | £1,400 |
| Road tax | £320 |
| Van servicing and maintenance | £1,000 |
| Fuel (20,000 miles) | £2,400 |
| Business insurance (apportioned) | £500 |
| Tools and equipment | £400 |
| Training | £400 |
| Software and systems | £1,800 |
| Admin overhead | £2,000 |
| Total annual cost | £55,503 |
| Realistic billable hours (1,730 × 70%) | 1,211 hours |
| Break-even hourly rate | £45.83 |
| With 20% net margin | £57.29 |
If you have five engineers all on similar terms and costs, multiply these figures by five. Shared overheads like admin staff and software won’t scale at the same rate, so the per-engineer cost drops as the team grows, and that’s where the margin improvement starts to appear.
What the market is actually charging
The calculation above produces a floor rate of £55 to £60 per hour. Here’s where that sits against what trades businesses are actually charging customers in 2025 and 2026.
Based on current market data from Checkatrade, MyBuilder, and Logic4training:
- Plumbers: £40 to £60 per hour nationally, averaging around £50. London rates reach £60 to £120. Day rates average £325 to £375.
- Gas and heating engineers: average hourly rate of £58.57 in 2026 according to Gas Engineer Software data from 6,000+ UK businesses. Day rates average £400. Emergency call-out fees average £75.
- Electricians: £44 per hour average in 2025 (Logic4training survey). Day rates £125 to £600, averaging £335.
What’s revealing about these figures is that the market average for plumbers is close to the break-even floor calculated above, not comfortably above it. Businesses charging £40 to £45 per hour with a van and a £30,000-plus engineer are almost certainly not covering their true costs, or they are cutting corners somewhere in their cost structure.
The average heating engineer rate of around £58 per hour sits right where the numbers suggest it needs to be for a viable business. Electricians at £44 average suggest the electrical sector has a widespread pricing problem at the lower end.
Your rate should be set by your costs plus your target margin, then checked against the market to confirm it’s in the right range, not the other way around.
How to use your rate in practice
Your hourly rate is the foundation of everything else you quote. Here’s how it feeds into the real world.
Fixed-price jobs
Most customers prefer a fixed price. They want to know what they’re paying before the engineer arrives. Your hourly rate is the engine behind that price.
Estimate the time the job will take (realistically, including any travel or setup time you’re absorbing), multiply by your hourly rate, add materials at cost plus your materials margin (typically 15% to 25% on parts), and build in a contingency for unexpected complications.
If you consistently find jobs running over the estimate, your time estimates are too tight, not a reason to cut your rate.
Call-out fees
A call-out fee is legitimate and sensible. It covers the cost of an engineer travelling to a job before any billable time begins. Many field service businesses in the UK charge £50 to £75 as a standard call-out fee, higher for emergency or out-of-hours callouts.
Emergency premiums of 50% to 100% above the standard rate are normal and defensible; the cost of keeping a rota, holding stock for emergency repairs, and disrupting a planned schedule is real.
Service agreements
Maintenance contracts and service agreements are typically priced at a slight discount to reactive rates, because the predictability of the work reduces your scheduling overhead and the customer is committing volume. If your standard rate is £58 per hour, a service agreement rate of £50 to £52 per hour is reasonable, provided the contract volume genuinely reduces your per-job overhead.
The Fieldmotion article on service agreements covers the full mechanics of pricing and selling contracts.
Reviewing your rate
Your costs don’t stay still. National Insurance increased in April 2025. The National Living Wage rose 6.7% in the same month. Fuel duty relief ends in August 2026. Van insurance and maintenance costs have been rising at 7% to 8% per year.
Most field service businesses should be reviewing and increasing their rates at least once a year, typically at the start of April to coincide with the new tax year. If you haven’t increased your rate in two years, you’ve almost certainly seen your margin erode.
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Frequently asked questions
What if I’m the engineer and the business owner?
What about materials margins?
Does VAT affect this calculation?
How do subcontractors change things?
What’s the right profit margin?
How does this work for a team rather than one engineer?
The number most field service businesses need to know is not what competitors are charging. It’s the minimum their own cost base requires, and how far above that floor the market will bear. The calculation above gives you the first number. Your local market, your reputation, and the quality of your service determine the second.
If you’d like to track job costs, actual billable hours per engineer, and real margins per job automatically, book a Fieldmotion demo to see how it works in practice.
