What to charge per hour for an excavator with an operator

To set an hourly rate for an excavator with an operator, add the machine's cost per hour, the operator's loaded labor cost per hour, your overhead per hour, and a profit margin, then check the result against what other shops in your area charge. The market tells you what you can get. Your own costs tell you the lowest rate you can afford to accept.

This comes up constantly. A homeowner calls and asks what you get for an excavator and a guy by the hour. If the answer is a number you picked because it sounded right, you may be working for less than the machine costs to run. Here is how to build the number from your own books instead.

The four pieces of an hourly rate

1. Machine cost per hour. Payment or depreciation, insurance, repairs and parts, tires or tracks, fuel and fluids, divided by the hours the machine really runs in a year. Our page on equipment cost per hour walks through each piece.
2. Operator cost per hour. Not the wage on the paycheck. The loaded cost: wage plus payroll taxes, workers' comp, insurance and benefits you pay on top.
3. Overhead per hour. Office, insurance that is not tied to one machine, software, the truck the owner drives, yard rent. See overhead and markup for how to spread it.
4. Profit. What is left for the business after everything else. It is not the same as your pay.

The hours matter more than the rate

The most common mistake is dividing yearly costs by too many hours. A machine that sits in the yard half the year does not run 2,000 hours. If you spread the fixed costs over hours you will not actually bill, every billed hour is short.

Use the hours the machine really billed over the last year or two. If you do not know, that is the first thing to start tracking. When the machine's hours per job are written down, next year's number is measured instead of guessed.

A worked example (made-up numbers)

This is an example only, with round invented numbers and a mid-size excavator. Use your own.

• Assumed yearly owning cost (payment, insurance, storage): $18,000
• Assumed hours billed per year: 900
• Owning cost per hour: $18,000 divided by 900 = $20
• Assumed running cost per hour (fuel, repairs, wear parts, fluids): $30
• Machine cost per hour: $20 plus $30 = $50
• Assumed operator wage: $30 per hour, with a loaded cost of $40 per hour once taxes, comp and benefits are added
• Assumed overhead per billed hour: $15
• Total cost per hour: $50 plus $40 plus $15 = $105

Now add profit. A 20 percent margin on price means you divide cost by 0.80, which is $105 divided by 0.80, about $131 per hour. A 20 percent markup on cost would be $126. These are not the same number, and mixing them up is how a rate ends up lower than planned. Pick one method and use it every time.

Change one input and watch it move. If the machine bills 600 hours instead of 900, owning cost per hour goes from $20 to $30, and the rate climbs by about $12. That is why your own billed hours matter more than any number you find online.

Wet rate, dry rate, and what is included

Say exactly what the hourly rate covers, or it will be argued later.

• Operator included or not. A machine rate without an operator is a dry rate. With an operator is a wet rate in many shops, though the words vary. Write it out.
• Fuel. In or out. If out, say what you charge when fuel prices swing.
• Attachments. Bucket, thumb, hammer and breaker are often priced differently. A hammer wears out faster than a bucket.
• Hauling the machine. Lowboy time and trucking to and from the site are usually separate from the hourly rate. See pricing trucking and haul-off.
• Portal to portal or on site only. Say when the clock starts and stops.

Minimums protect the day

Most shops set a minimum, such as four hours, because getting a machine to a site and set up costs the same whether it digs for one hour or six. The minimum should cover your mobilization costs plus the real chance of losing the rest of the day. State it on the quote.

Also say how you treat waiting. If the customer is not ready, or a locate is not marked, is the machine still on the clock? Put the answer in writing before you load the lowboy. A late or expired ticket is its own headache, covered in markouts and the 811 clock.

Hourly rate or a fixed price?

Hourly pricing puts the risk of surprises on the customer. Fixed pricing puts it on you and pays you for being efficient. Neither is always right. Our article on time and materials versus fixed price goes through when each fits. If you do quote by the hour, a rough hour count in the quote helps the customer plan, as long as it says the number is an estimate.

Check your rate against the market

Once you have a cost-based number, look at what other shops charge for similar machines and operators near you. If the market is higher, you have extra margin. If it is lower, you have a decision: find savings, charge more on jobs where your speed pays for itself, or pass on the work. Do not quietly accept a rate below your cost and hope volume fixes it. It will not.

Keep the number current

Repair costs go up as a machine ages, fuel moves, and wages change. Recheck your rate at least once a year. Then compare it to what the jobs actually cost, which you can only do if hours are tied to jobs. See job costing for dirt contractors and the article on raising your rates.

Where TrackOver fits

TrackOver ties crew hours and machine time to each job, so your next hourly rate starts from measured hours instead of a guess. The free dirt calculator helps you size a job before you quote the hours. When you are ready, start the 7-day free trial, no card needed.

Common questions

Should the rate include the operator? Whichever you choose, write it on the quote. Many shops quote a machine with an operator as one rate so the customer does not have to guess.

Why not just copy a rate I found online? Because it does not include your payment, your fuel, your insurance or your operator. Use it to compare, not to build your number.

How often should I change my rate? Check it at least once a year, and again when a major cost changes, such as a new machine or a big jump in insurance.

Is a minimum charge fair? Yes, when it covers real costs of getting the machine to the job. Put it in writing so it is not a surprise.