Contractor Finance Glossary
What is Gross Profit per Labor Hour?
Also called: gross profit per human hour, gross profit per technician hour
Gross profit per labor hour is the gross profit a business earns for each hour of scarce skilled labor, calculated as total gross profit divided by billable or worked labor hours. It is Level's core operating metric.
For labor-heavy businesses, skilled people are the constraint, not capital. Revenue and even blended margin can hide whether each hour of that scarce labor is actually producing profit. Gross profit per labor hour makes the constraint the headline number.
The metric adapts by vertical: gross profit per technician hour in the trades, per provider hour in healthcare, per recruiter in staffing, per engineer hour in software. In every case it answers the same question, which is whether the crew you already have is producing more margin this month than last.
How it is calculated
Gross profit per labor hour = total gross profit for the period divided by total billable (or worked) labor hours for the same period. Rising over time means the same crew is producing more margin.
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