Plenty of fabrication shops set prices by eye, adding a standard margin to the cost of materials. That works while volumes are low, and then it stops working: fixed costs grow, labour hours spread across more jobs, and without a precise number it becomes impossible to know whether you are really making money.
What the true hourly cost includes
Your true hourly cost is not a worker's wage divided by the hours they work. It is the sum of two distinct parts:
- Direct cost: gross pay, social security and insurance contributions, severance provision and the extra monthly instalments, for the worker carrying out the job, expressed per hour actually produced.
- Absorbed overheads: rent on the unit, utilities, machine maintenance, insurance, the accountant, software, depreciation — everything the business pays regardless of any individual job, spread across the total productive hours in the year.
The step most people skip: real productive hours
A full-time worker is on the clock 40 hours a week, but not all of those become billable production hours: holidays, sickness, training and the dead time between one job and the next bring real productivity down to a percentage — typically between 75% and 90% depending on how the shop is organised. Ignore that gap and you will systematically understate your hourly cost, and therefore quote at a loss without realising it.
The formula, in short
True hourly cost = direct hourly cost + (annual fixed costs + annual loan repayments) / annual productive hours.
With two workers, a 40-hour week over 48 weeks and 85% productivity, annual productive hours come out at around 3,200-3,300. On that basis, every euro of annual fixed cost bears directly and measurably on the hourly rate you need to charge simply to cover your outgoings.
Why it is worth automating
Recalculating this number by hand every time a fixed cost changes, a worker is hired or a loan is updated is a job nobody does consistently — and, in practice, almost nobody does at all. A calculation engine that holds staffing scenarios, overheads and debts together gives you an hourly cost that is current, so every quote starts from a real figure rather than an estimate from several months ago.