Build your California rate from the burden up, not from what the last guy charged

Somebody asked what you charge an hour and you said a number you have been saying for two years. The jobs still come in, the crew is busy, and the bank account is not growing. That is the specific shape of the California problem: a rate that was correct in the year you set it, carrying a cost stack that has moved every year since, on work that gets paid three months after you spent the money.

A charge out rate is not a market number you copy. It is the answer to an arithmetic problem with four inputs: what an hour of labor actually costs you once it is loaded, what it costs you to simply exist as a licensed California business, what the money costs you while you wait for it, and what you intend to keep. Every one of those is knowable before the year starts, which is why pricing is the most fixable margin problem in this business.

This page builds the number in that order, with real dates on the parts that involve a calendar.

Nobody buys an hour of wage

The wage on the pay stub is the smallest part of what an employed hour costs you. In California the loaded cost of a field hour carries, at a minimum:

• The base wage, plus any overtime the job actually generates
• Workers compensation premium, priced by your classification code and your experience modification
• Employer payroll taxes, state and federal
• General liability, and the vehicle and equipment cover behind the crew
• Non productive paid time: travel between jobs, yard time, tool maintenance, cleanup, training, safety meetings
• Any holiday, sick or vacation time you provide
• Small tools, consumables and phone

The rates on the first three lines come off your own documents rather than off any published table: your carrier's declarations page for the comp premium, your payroll returns for the tax lines. Pull those numbers once a year, in January, and divide the annual total by the field hours the crew actually sold. That quotient is your burden multiplier, and it is yours specifically. Two painters in the same city with the same wage rate and different experience modifications have genuinely different costs, and the one who assumes an industry number is either giving work away or losing bids.

One line in that list is not negotiable and not just a cost. Workers compensation cover is what keeps your license alive: cover lapses and the license is suspended by operation of law on that day, with no warning and no grace period (BPC and CSLB). A rate that does not carry the premium is a rate that eventually cannot be charged at all. What that cover has to look like is in workers compensation for a California contractor.

Then there is the non productive time, which is where most contractors quietly lose the year. If you pay for 2,080 hours and sell 1,600 of them, your loaded cost per sold hour is thirty percent higher than your loaded cost per paid hour. Count the sold hours honestly from last year's job records rather than optimistically from the calendar.

What it costs to simply exist here

Separate from labor and separate from jobs, a licensed California business carries a fixed annual cost that does not care how the year goes. These are numbers you can write down today.

Run one real business through it. A C-33 painting LLC that will bill $560,000 this year, and sells 4,200 field hours.

• Minimum franchise tax: $800 (FTB)
• LLC gross receipts fee, in the tier that starts at $500,000: $2,500 (FTB)
• CSLB active renewal at the non sole owner rate of $700 biennially (CSLB fee schedule), which is $350 a year
• Subtotal of the published numbers alone: $3,650

That is before a single dollar of bond premium, insurance, city registration, truck payment or accounting fee. Divided across 4,200 sold hours, the published lines alone are $0.87 an hour, and adding the bond premiums, the liability policy and the vehicles makes the real figure a multiple of that.

Two things there are worth reading twice. The gross receipts fee is charged on revenue rather than profit, and it steps on a single dollar rather than sliding: the tier arithmetic is in franchise tax on a California contractor. And your entity choice moved two lines at once, because an LLC pays the non sole owner renewal and carries the second bond under BPC s.7071.6.5. What both bonds cost and who signs for them is in the bond and qualifier guide.

Every one of these belongs in overhead, recovered across all the work, never charged to whichever job happens to be running when the bill arrives.

Markup is not margin, and the gap is your profit

This is the single most common arithmetic error in contractor pricing, and it costs more than every other item on this page combined. Markup is a percentage added to cost. Margin is a percentage of the price. Applying one while intending the other loses money silently on every job.

Take a job that costs you $42,000 to build, fully loaded.

• Add 20 percent markup: the price is $50,400. Your gross profit is $8,400, and $8,400 of $50,400 is a margin of 16.7 percent.
• Want 20 percent margin instead: divide the cost by 0.80. The price is $52,500, and that is a markup of 25 percent.

The difference is $2,100 on one job. Run twelve jobs that size in a year and the same misunderstanding costs $25,200, which for most small contractors is the whole difference between a good year and a flat one. The markup and margin calculator is free, needs no signup and converts between the two in both directions. Set the number once, write it on your estimate template, and stop deciding it per job.

Price against the index, not against last year

Here is where California hands you a tool that most contractors never pick up. The escalation index for construction work in this state is the DGS California Construction Cost Index, and it exists precisely so that you do not have to guess whether material and labor are moving.

Two rules make it usable.

Escalate to the midpoint of construction, not to the bid date and not to the start date. Your costs are incurred across the whole build, so the fair point to price at is the middle of it.

Keep escalation separate from contingency. They cover different things. Escalation is a known direction of travel. Contingency is unknown scope and unknown conditions. Merge them and you cannot tell which one absorbed the overrun, so you learn nothing from the job.

Work one job's dates.

The costs in that bid were real on 10 March. The job's center of gravity is 31 August, nearly six months later, so pricing it at bid date cost means absorbing every move in between out of your margin. Escalate to 31 August using the index, show it as its own line, and add contingency separately for the things nobody can index.

For a public job the rule is different and firmer: the wage determination that governs is the one in force on the bid advertisement date, and it governs for the life of the job. General determinations issue twice a year and take effect 10 days after issue, and double asterisk determinations carry predetermined increases that you program into the estimate rather than discover in month eight. Prevailing wages apply to public work over $1,000, and public works overtime starts after 8 hours in a day or 40 in a week, which is a different cost structure from the same crew on private work. Getting that into an estimate is prevailing wage for California contractors.

The money costs you something while you wait for it

A rate that ignores the calendar is a rate that borrows from you. California's payment clocks are generous to whoever is holding the money.

Take the same job, completed 30 November 2026, private work, and you are the direct contractor.

Payroll you funded on 12 June is settling up on 14 January. That is seven months of your money out on the street, on a job that finished on time and paid on time. If you are a subcontractor the chain adds links: your prime pays you within 7 days of receiving the progress payment (BPC s.7108.5), and passes retention down within 10 days of receipt (Civ. Code s.8814), while a good faith dispute lets them hold up to 150 percent of the disputed amount (BPC s.7108.5).

Residential work adds a specific squeeze. On a home improvement contract the down payment is capped at the lesser of $1,000 or 10 percent of the contract price (BPC s.7159 family), and payments may not run ahead of the value delivered. On a $60,000 remodel that means $1,000 up front against a material order many times that size, so the schedule of payments is a financing document as much as a payment one. Writing it correctly is the California home improvement contract guide, and getting retention back on time is retention and release.

The pricing response is not a mystery percentage. It is a number: your average days from spend to receipt, multiplied by what money costs you, carried in overhead like everything else. Know it and you can price a fast paying customer differently from a slow one, on purpose.

Assemble it

Five lines, done once a year in January, then applied to every estimate.

1. Loaded labor cost per sold hour. Wage plus burden from your own documents, divided by hours actually sold rather than hours paid.
2. Overhead per sold hour. The fixed stack, including the $800 (FTB), your LLC tier if you have one, the CSLB renewal spread over its biennial cycle (CSLB fee schedule), both bond premiums, insurance, vehicles, city certificates and software, divided by the same hours.
3. Escalation to the midpoint, indexed to the DGS California Construction Cost Index, shown as its own line.
4. Contingency, separate, sized to the risk in that specific scope.
5. Profit as a margin, converted to the markup that produces it, not applied as a markup and hoped to be a margin.

The result is a number you can defend line by line to a customer, adjust deliberately when you want the job, and update in an hour next January. What it is not is a number somebody at the supply house told you.

Set it once, this month

Every input above is available right now. The statutory costs are published, your burden is on your own payroll returns, your sold hours are in last year's job records, and the index is public. There is no research problem here, only an arithmetic one, which is why doing it is worth more than winning another bid.

On AEC Stack there is no monthly subscription. The platform fee is 2.5 percent of each invoice processed through the platform, so the records that produce your sold hours and your real payment timing are the ones you are already keeping.

Start with the piece that pays for itself immediately. Put the profit you actually want into the markup and margin calculator, see what markup produces it, and correct your estimate template today. Then open a working business file and put your overhead stack in one place, so next January the rate takes an hour rather than an argument.