Calculate your true machine shop hourly rate. This free shop rate calculator loads your labor burden, depreciates your machine honestly, allocates shop overhead, and gives you a break-even rate plus a target quoted rate.
Most small shops underprice themselves. You set a rate five years ago, maybe checked what the shop down the road was charging, and never really went back to look at the math. Then insurance goes up, your machinist gets a raise, power bills climb, and you're still quoting off the old number. The gap between what you charge and what you actually need to charge comes straight out of your pocket.
The math for a real shop rate is straightforward. Loaded labor per hour, plus what a machine costs you per hour, plus shop overhead per hour, times your target margin. The trap is not the formula. The trap is the assumptions that feed it. Most of all, how many hours you actually run billable in a year.
Your machinist's gross wage is not what they cost you. You also pay payroll taxes, workers comp (which runs 7 to 18 percent alone in manufacturing), unemployment, benefits if you offer any, and paid time off. All that bundled together is called labor burden, and for a typical US small shop it lands around 23 percent on top of gross wages. So a $25/hour machinist actually costs you close to $31/hour in the seat. Bump the burden number up if you carry real health benefits.
Then divide that loaded annual labor by the hours that machinist is actually billable. Not the hours they're on the clock. The hours you can invoice against. Breaks, training, cleanup, material handoffs, setups between jobs, and the five minutes everyone spends looking for the right fixture plate all come out of that number. That's where most shops go wrong.
A machine costs you money two ways. It loses value over time, and it eats power, tooling, and repairs while it runs. For depreciation the calculator uses straight-line over the useful running hours. An $80,000 VMC with a $10,000 salvage value and a 20,000 hour life costs you $3.50 per hour just in depreciation, before you pay the power bill or buy one insert. That's capital recovery. If you don't collect it in your rate, you can't replace the machine when it wears out. Which means you slowly go out of business without noticing.
Variable machine costs are simpler. Add up power, tooling, consumables, and routine maintenance for the year. Divide by your billable hours. On a modest shop machine this usually works out to $8 to $15 an hour. Spindles with high power draw or aggressive roughing push it higher. If you don't know your real spend, guess high. It costs you less to overestimate consumables than to under-collect on every job for a year.
Rent. Utilities that aren't directly tied to the machine. Insurance. Admin, your bookkeeper, software subscriptions, the accountant at tax time, office supplies. None of that goes away when a machine is idle. All of it has to get paid out of your billable hours. Add up the annual total and divide by billable hours. For a one-man, one-machine shop this usually works out to $15 to $25 an hour. For larger shops with more people to spread it across, it comes down. Either way the number has to be in the rate or it comes out of your wallet.
Shops that skip this step are the same shops that feel busy but never have money in the checking account. The jobs look profitable in isolation because material plus labor plus a small markup pencils out, but nothing in that math pays for the building or the light bill.
Break-even is a floor, not a rate. At break-even you're running for free and any job that runs long or takes rework loses money. Your real quoted rate should include 15 to 25 percent on top of break-even. That's not optional profit. It's what pays the owner, builds up the cash cushion that gets you through a slow quarter, and funds the next machine when the current one finally dies. The default here is 20 percent because that's the number every industry article cites. If you're in a commodity niche and have to match a cheaper shop, you might accept a lower margin and find costs to cut instead. Don't zero it out. Running with no margin is how shops go under when they hit one bad month.
Every shop rate calculator on the internet asks for "hours per year" and every shop owner types in 2,000 because that's what a full time employee works. That number is almost always wrong for billable machine time. A realistic 1 shift shop runs a machine 1,600 to 1,800 billable hours per year after you account for setup between jobs, maintenance, waiting on material, breaks, vacation, and the afternoons where something goes sideways. If you're punching in 2,000 for your effective hours, your real shop rate is 10 to 20 percent higher than whatever this calculator just told you. The sensitivity box on the right shows what a 10 percent drop in billable hours does. It's usually eye opening.
Published benchmarks cluster into rough bands. A one-person shop with older, modest equipment and cheap rent tends to come in at $60 to $80 an hour. A mid-size shop with good late-model equipment and honest overhead sits at $90 to $120. Shops with $200k+ machines, 5-axis work, or tight tolerance deliverables routinely charge $125 to $160. MSC cited $150/hour as reasonable for a machine with $100,000 sitting on the floor. If this calculator says your rate should be $95/hour and you're charging $70/hour, the gap isn't a mistake. It's the reason your checking account feels tighter than the job board looks.
A lot of shops do this math in a spreadsheet once and then never open it again. The problem isn't the spreadsheet. The problem is that inputs drift. Insurance renews and goes up 12 percent. You upgrade a machine. Your machinist gets a raise. A new lease kicks in. The spreadsheet doesn't notice. A year later you're quoting off a rate that was right in 2023. A live calculator won't fix the problem of not revisiting your numbers. But when you do revisit, you don't have to remember where you stashed the file or which of the fourteen tabs had the real totals.
Abstract formulas are hard to trust until you see real numbers go through them. Here is a concrete walk-through for a common scenario: a one-man shop with one Haas VF-2, renting a bay in an industrial park. Nothing exotic. The kind of setup a lot of shops start with.
Start with labor. The machinist (who is also the owner) pays himself $27 an hour gross, which works out to $56,160 a year. Apply 23 percent burden for payroll taxes, workers comp, and a minimal benefits package. Loaded annual labor is 56,160 × 1.23 = $69,077. He runs one shift and estimates 1,700 billable hours a year after accounting for setup time, maintenance days, a week of vacation, and the afternoons where nothing goes right. Loaded labor per hour: $69,077 ÷ 1,700 = $40.63/hr.
Next, the machine. The VF-2 cost $90,000. He figures he can sell it for $12,000 when it's done. Useful life is 20,000 spindle hours. Depreciation per hour: ($90,000 − $12,000) ÷ 20,000 = $3.90/hr. Variable machine costs are $5,000 a year in repairs and consumables plus $4,000 in power and tooling. Divided by 1,700 billable hours that's ($5,000 + $4,000) ÷ 1,700 =$5.29/hr. Total machine rate: $3.90 + $5.29 =$9.19/hr.
Fixed overhead. Rent is $1,800 a month ($21,600/yr). Utilities run $500 a month ($6,000/yr). Insurance is $350 a month ($4,200/yr). Admin and miscellaneous costs like the accountant and shop supplies total $800 a month ($9,600/yr). Software subscriptions run $250 a month ($3,000/yr). Annual fixed overhead: $21,600 + $6,000 + $4,200 + $9,600 + $3,000 = $44,400. Per hour: $44,400 ÷ 1,700 =$26.12/hr.
Break-even rate: $40.63 + $9.19 + $26.12 = $75.94/hr. That is the absolute floor. Every hour billed below that number loses money. Apply a 20 percent target margin: $75.94 × 1.20 = $91.13/hr.
Round to $91 an hour. If that feels high compared to what you charge now, the gap is the margin you have been giving away. Plug your own numbers into the calculator above and see where yours lands. Most shops that do this exercise for the first time discover they have been quoting 15 to 20 percent below their real cost.
Rates vary widely depending on equipment, headcount, and what kind of work you take on. Here is how loaded shop rates (not just machine time, but the full rate including labor, overhead, and margin) typically break down:
Geographic variation matters too. Shops in the Northeast and on the West Coast typically run 10 to 15 percent higher than comparable shops in the Southeast or Midwest, driven mostly by rent and labor cost differences. These ranges come from Modern Machine Shop's Top Shops 2024 benchmarking survey and NTMA operational data. Your actual rate depends on your actual costs. Use the calculator above instead of guessing where you fit.
The machine hour rate (MHR) is the per-hour cost to operate a specific machine, separate from labor and shop overhead. It answers a simple question: what does it cost you every hour this spindle turns? MHR equals depreciation per hour plus variable machine costs per hour (power, tooling, repairs, consumables). That's it. Labor and rent are not in it.
Common MHR ranges for US shops: a manual lathe runs $15–25/hr, a 3-axis VMC sits at $25–45/hr, a 5-axis mill lands at $50–80/hr, and a Swiss lathe falls in the $40–65/hr range. The spread within each category depends on age, purchase price, and how hard you run the machine.
Why does MHR matter separately? Because different machines have different costs per hour. When you quote a job that runs on two machines, each one contributes its own MHR to the job cost. A part that starts on a lathe and finishes on a 5-axis mill has a very different cost profile than one that runs start to finish on a single VMC. This calculator folds MHR into the full shop rate for simplicity. If you need just the machine hour rate for internal job costing, look at the machine depreciation and variable cost lines in the breakdown above.
The default values and benchmark ranges in this calculator draw from published industry data. The 23 percent labor burden figure comes from the Bureau of Labor Statistics Employer Costs for Employee Compensation series (ECEC, manufacturing sector, 2024). Workers comp ranges of 7 to 18 percent for manufacturing are from the National Academy of Social Insurance annual report. The $60 to $160 per hour shop rate bands reflect survey data published by Modern Machine Shop's Top Shops benchmarking program (2023 and 2024 editions) and MSC Industrial Direct's machining cost guides. The 1,600 to 1,800 billable hours estimate for a single-shift shop comes from the NTMA (National Tooling and Machining Association) operational benchmarks. The 15 to 25 percent target margin range is consistent with NTMA profitability reports for small job shops. All figures are US-focused and may not apply to shops outside the United States. Actual costs vary by region, insurance carrier, and shop configuration. Run the numbers with your own inputs.
Free tool from swarf.shop. No email, no signup, no catch. We build job tracking software for small machine shops. These calculators are stuff we needed ourselves.