Shop Rate vs. Take Home Rate: How Contractors in Alberta can Keep More Money in their Pockets
When Your $120/Hour Rate Becomes a $15/Hour Reality
Let’s say you're charging $120 per hour for your services as a heavy equipment operator in the oil patch. Your clients pay without question because they know you're worth it. But when you sit down to calculate what you actually took home last month, the number makes your stomach drop. After covering fuel, equipment maintenance, insurance, and all the other costs that come with running a contracting business, you realize you're making less per hour than someone flipping burgers at McDonald's.
This is the harsh reality for thousands of Alberta contractors who work their asses off but can't figure out where all that money actually goes.
It’s not necessarily your rates or even your overall money management skills. In most cases, it’s a systems problem, and the good news is that systems problems always have solutions!
The Hidden Costs That Eat Your Profits
Most contractors focus on their hourly rate because that's the number clients see. But your shop rate is just the starting point. Between that invoice and your personal bank account sits a maze of business expenses that can turn a great day on the books into a disappointing pay period.
Here’s some of what can happen to that $120/hour in the real world:
Equipment and Vehicle Costs: Your truck payment, fuel, maintenance, and insurance can easily eat $30-40 per hour of actual work time. In Alberta's climate, winter preparation and equipment protection add even more.
Downtime Between Jobs: The drive between Fort McMurray and Calgary isn't billable time, but it's still time away from home. Weather delays, permit issues, and client schedule changes mean you're often only billing 60-70% of your available hours.
Seasonal Fluctuations: Alberta's economy runs in cycles. When oil prices dip or winter shuts down construction projects, contractors often scramble to cover fixed costs with reduced income.
Tax Obligations: Sorry to remind you of it, but that $120 isn't all yours. The Canada Revenue Agency expects their cut, and without proper planning, tax season can wipe out months of hard-earned profit.
When you factor in all these costs, a contractor charging $120/hour might only be taking home $20-30 per hour of actual work. Brutal, right?
Why Some Contractors Track Real Hourly Rates
Tracking your hourly take-home pay… well, it pays! We can do this easily on an updated monthly basis for our clients because we keep their books clean throughout the year. But if you want to DIY it, here’s the simplest way to calculate it:
Total revenue for the month minus all business expenses (including taxes).
Then divide that by actual hours worked (not just billable hours).
Let's say you billed $9,600 last month at $120/hour (80 hours of work). After expenses of $6,000 and setting aside $1,200 for taxes, you kept $2,400. If you worked 100 total hours including travel and downtime, your real hourly rate was $24.
That's a far cry from $120, but it's the truth. And once you know the truth, you can start improving it.
The System That Keeps More Money in Your Pocket
The most successful Alberta contractors use a simple system to ensure they keep more of what they earn. Instead of hoping there's something left over after expenses, they allocate money the moment it comes in.
Here's how it works:
Pay Yourself First: The moment that invoice payment hits your account, set aside your personal pay. Before equipment payments, before fuel costs, before anything else. You're the most important employee in your business.
Tax Account: Another percentage goes immediately into a separate account for taxes. No more scrambling to find $15,000 for the CRA in April.
Equipment Reserve: A set percentage gets allocated for equipment maintenance and replacement. In the oil patch, equipment failure isn't just inconvenient—it's expensive.
Emergency Buffer: Another allocation goes into an emergency fund for those inevitable slow periods or unexpected repairs.
Operating Expenses: Whatever's left covers your regular business expenses—now you have to figure out how to operate within them!
This allocation system ensures you're building wealth, not just covering costs. Your percentages for each portion can vary. This is what we help you set up in our Fast Track to Sustainable Profits system. We make sure the numbers make sense for your specific situation, and from there, help you with setup, tracking, and challenges.
When the Numbers Don't Add Up
Sometimes, running the real numbers reveals an uncomfortable truth: your current rates aren't sustainable. Maybe you're competing on price instead of value, or you're taking jobs that barely cover costs just to keep busy.
Here's some straight talk: if your true hourly rate is below what you'd accept from an employer, you're not running a business—you're funding an expensive hobby. That means it's time to make changes.
This might mean raising rates, finding more efficient ways to operate, or focusing on higher-value clients who appreciate quality work. The key is having accurate numbers to work with. You can't fix what you don't measure.
Reality Check Questions Every Contractor Should Ask:
Am I making more per hour than I would working for someone else?
Do I have money set aside for equipment replacement?
Can I afford to take a week off without financial stress?
Am I building wealth or just covering expenses?
Most contractors never ask these questions because they're afraid of the answers. But avoiding the truth doesn't change it—it only keeps you trapped in the same problems.
The Alberta Advantage: Working Smarter, Not Just Harder
Alberta contractors have unique advantages that many don't fully leverage.
Working from Hinton to Fort MacMurray, we've seen contractors transform their businesses by focusing on three critical areas:
Client Selection: Stop chasing every job. The best-paying clients are often the ones willing to pay premium rates for reliability and quality work. They understand that cheap contractors cost more in the long run.
Seasonal Planning: Alberta's economy is cyclical, but that doesn't mean your income has to be. Future-proofing by using busy periods to build reserves for slower months. This means you can maintain consistent personal pay year-round instead of feast-or-famine cycles.
Equipment Strategy: Your equipment is an investment, not just an expense. Professional bookkeeping and accounting services help you track depreciation properly, maximize deductions, and plan for replacements before emergencies force expensive decisions.
Building a Business That Actually Pays You
Your contracting business should support your life, not consume it. That means consistent pay periods, money set aside for taxes, and the ability to weather Alberta's economic ups and downs without panic.
The contractors who achieve this aren't necessarily smarter or more skilled. They just have better systems for managing money. They track their real hourly rates, allocate funds automatically, and make decisions based on actual numbers rather than hopes.
This is exactly why we work with contractors across Alberta. From Peace River to Lethbridge, we've seen the same pattern: brilliant tradespeople who excel at their craft but struggle with the business side. That's where we come in.
We don't use accounting jargon or make you feel stupid for asking questions. We speak your language and understand that you'd rather be on a job site than dealing with spreadsheets.
Ready to build a contracting business that actually rewards you for the work you do? Book a Profit Clarity Call and let's look at your specific situation. We'll show you exactly where your money goes and how to keep more of it in your pocket. No complicated spreadsheets or accounting jargon—just straight talk about making your hard work pay off.