Overhead Cost Calculator
Total your indirect costs and see your overhead rate against direct labor, overhead per employee, and overhead as a share of revenue.
How overhead rate is calculated
Overhead rate = total indirect costs ÷ total direct labor cost. The direct labor figure should be fully burdened — wages plus payroll taxes and benefits — which you can get from the labor cost calculator. Using unburdened wages understates the rate and quietly inflates your margins on paper.
Overhead per employee is a simpler sanity metric: total overhead divided by headcount. It answers "what does one more desk actually cost?" and belongs in every hiring decision alongside the true cost of the employee.
Watch the trend monthly. A rising overhead rate with flat revenue means the business is getting more expensive to run per dollar earned — the earlier that's visible, the cheaper it is to fix.
Frequently asked questions
What counts as overhead?
Overhead is every cost of running the business that isn't directly tied to producing revenue: rent, utilities, admin and support salaries, software subscriptions, insurance, marketing, professional fees, and office supplies. Direct labor and direct materials are excluded — they're direct costs.
How do I calculate my overhead rate?
Divide total overhead by total direct labor cost for the same period. If monthly overhead is $13,800 and direct labor is $45,000, the overhead rate is about 31% — every dollar of direct labor needs to carry 31 cents of overhead before profit.
What is a healthy overhead percentage of revenue?
It varies by industry, but service firms commonly target overhead at 15%–30% of revenue. Above 35% usually signals excess capacity, admin bloat, or underpriced services. Track the trend over time rather than fixating on a single month.
How is overhead used in pricing?
Add an overhead allocation to your fully burdened labor cost before applying target margin. Common allocation bases: percent of direct labor cost, dollars per billable hour, or dollars per employee. The right base is the one that mirrors how overhead is actually consumed.