Skip to main content
/
overheadbilling-rategovernment-contractingpricingcostG&Afringeburden rate
//// Business · Contracting

Contractor Overhead Rate

Enter your direct labor, indirect costs, fringe benefits, and G&A — get your overhead rate, billing multiplier, and the per-$100 cost breakdown used in government contracting proposals and consulting bids.

Where this fits

💸 Budgeting & Cash FlowGoing 1099Cash FlowFreelancersFounders

This tool lives inside Going 1099 + Cash Flow and is most useful for freelancers and founders.

Corp Tax Rate21%
SE Threshold$400
FICA Cap 2024$168,600

Cost Structure

Overhead Rate
30.0%
% of direct labor
G&A Rate
15.0%
% of direct labor
Billing Multiplier
2.00×
× your direct labor cost
Annual Billing Rate
$240,000
15.0% profit included

Per $100 of Direct Labor

billing rate → $200.00
Direct Labor
$100
Fringe Benefits
$25(25.0%)
Overhead
$30(30.0%)
G&A
$15(15.0%)
Profit
$30(15.0%)
Total Billing Rate$200.00

Rate Summary Table

Cost PoolAnnual $Rate
Direct Labor$120,000Base
Fringe Benefits$30,00025.0%
Overhead (Indirect)$36,00030.0%
G&A$18,00015.0%
Burdened Labor$204,0001.70×
Profit$36,00015.0%
Billing Rate$240,0002.00×

Bottom line: For every $100 of direct labor, you need to bill $200.00 to cover all costs and hit your 15.0% profit target.

1

Annual indirect cost pool — facilities, admin, equipment

indirectCostMonthly × workingMonths

$3,000 × 12 mo

= $36,000

Indirect costs cannot be traced to a single contract — they benefit all billable work and are pooled annually before rate computation.

FAR 31.203(a) — indirect cost accumulation

2

Annual G&A cost pool — accounting, legal, BD, software

gaMonthly × workingMonths

$1,500 × 12 mo

= $18,000

G&A costs support the overall enterprise, not specific projects. Tracked as a separate pool from overhead to allow different allocation bases.

FAR 31.203(d) — G&A expense pool

3

Annual fringe benefits cost — IRC §132 / FAR 31.205-6(b)

annualDirectLabor × fringeBenefitsRate

$120,000 × 25.0%

= $30,000

Fringe benefits (health, 401k match, payroll taxes) are allowable costs when consistently applied and documented — IRC §132 governs excludability for employees.

FAR 31.205-6(b) — compensation for personal services

4

Overhead rate — FAR 31.203 indirect cost allocation

annualIndirectCosts / annualDirectLabor × 100

$36,000 / $120,000 × 100

= 30.0%

The overhead rate is applied to every direct labor dollar on each contract. A 65% overhead rate means $0.65 of indirect cost is absorbed per $1.00 of direct labor.

FAR 31.203 — allocation of indirect costs

5

G&A rate — enterprise-level cost allocation

annualGA / annualDirectLabor × 100

$18,000 / $120,000 × 100

= 15.0%

G&A is typically allocated on total cost input or value-added base. Using direct labor as the base simplifies calculation for smaller contractors.

FAR 31.203(d) — G&A allocation base

6

Total burden rate — combined cost multiplier

1 + fringeRate + overheadRate + G&A rate

1 + 25.0% + 30.0% + 15.0%

= 1.70×

The burden multiplier converts raw direct labor cost into fully loaded cost. A 2.1× multiplier means $1 of labor costs $2.10 all-in before profit.

7

Fully burdened labor cost — FAR 31.001 total cost

annualDirectLabor × burdenMultiplier

$120,000 × 1.70×

= $204,000

Burdened cost is the floor for pricing — billing below this guarantees a loss on the contract.

FAR 31.001 — definition of cost; FAR 31.201 — allowable cost criteria

8

Billing rate — cost-plus pricing to target profit margin

burdenedCost / (1 − targetProfitMargin%)

$204,000 / (1 − 15.0%)

= $240,000 (2.00× of direct labor)

Profit is expressed as % of billing rate (revenue), not cost — the standard government contracting convention. A 10% profit on revenue ≈ 11.1% markup on cost.

Key insight

The FAR (Federal Acquisition Regulation) distinguishes direct costs (traceable to a specific contract) from indirect costs (shared across all contracts). Billing rate = burdened cost / (1 − profit margin%) because profit is conventionally measured as a percentage of revenue, not cost.

Use this result in →

Project Profitability →Freelance vs Employee →True Hourly Rate →

#ShowYourWork

You might also need

Freelance Overhead Calculator

What does it actually cost to run your freelance business? Calculate your true overhead rate across software, equipment, professional development, accounting, legal, and marketing — and see the minimum hourly rate you must charge just to cover costs before paying yourself.

Try it

Profit Margin Calculator

See your full profit waterfall — gross, operating, and net margin — with a freelance/small-business rating and sensitivity analysis. Know if you're struggling, viable, healthy, or strong before your next client negotiation.

Try it

Break-Even Calculator

Before you buy equipment, hire a subcontractor, or rent an office — know your break-even point. Enter fixed costs, variable cost per unit/hour, and your price to get break-even units, revenue, contribution margin, and profit at your current revenue level.

Try it

📊More Business tools

Freelance vs Employee Calculator→W-2 vs 1099 Calculator→True Hourly Rate Calculator→Freelance Project Profitability Calculator→All Business tools