Blended Rate

Why it matters

Blended rates make proposals simpler and hide your internal cost structure from the client. The risk is that a project skewing to senior time can quietly lose money at the blended rate.

Check the blended rate against the actual mix of hours on delivered work, not the mix you assumed when quoting.

To put numbers to it, the free blended rate calculator takes the hours and cost of each level and returns the blended cost of an hour alongside the margin your quoted rate leaves.

How to calculate a blended rate

Blended rate = total value of hours worked / total hours worked

Weight each person by the hours they actually contribute, then divide. The mistake worth avoiding is averaging the rates instead, because that quietly assumes everyone works the same amount.

Take a team of one senior at $55 an hour for 8 hours, a mid at $32 for 20 hours and a junior at $18 for 12 hours. The hours cost $440, $640 and $216, so $1,296 across 40 hours, and the blended rate is $32.40. Averaging the three rates gives $35.00, which is nearly 8% higher and wrong, because most of the work was done by the two cheaper people.

Our free blended rate calculator does this across a mixed team and shows the margin your quoted rate leaves against it.

Blended rate meaning: cost or price

The phrase gets used for two different numbers and confusing them is how an agency prices itself out of a margin. A blended cost rate is what an hour costs you, meaning salary plus overhead spread across the team. A blended bill rate is what the client pays. The gap between them is your margin.

When somebody says "our blended rate is $95", they almost always mean the bill rate. When a finance report says the blended rate rose, it usually means the cost rate. The two moving in the same direction is normal; the two being mistaken for each other is how a project that looked profitable turns out not to have been.