Service Business Decisions
Billable Hours vs. Non-Billable Hours: Pricing Drive Time
Separate paid time from customer billing and design a pricing method that recovers unavoidable drive, dispatch, and field-support cost.
Billable hours vs non billable hours is a capacity and pricing distinction, not a judgment about whether time was useful. Drive time, estimates, callbacks, training, meetings, stocking, and shop work may be necessary even when they are not shown as separate customer invoice lines.
Record paid time honestly, classify the activity consistently, and decide how necessary nonbillable labor is recovered through trip charges, minimums, flat-rate pricing, service agreements, zone pricing, or the overall labor rate. Do not force nonbillable time into customer jobs merely to improve a utilization report.
Measure the time before pricing it
Define paid, productive, billable, and collected
Paid hours come from payroll. Productive hours are hours assigned to customer work under the company’s management definition. Billable hours or units are what the pricing system charges. Collected hours are not a standard accounting term, but management may calculate collected revenue per paid or productive hour.
Keep the measures separate. A flat-rate job can have zero itemized labor hours on the invoice while requiring two paid technician hours.
Apply wage-and-hour rules first
Current federal and state rules determine whether travel, waiting, meetings, training, preliminary work, on-call activity, and other time is compensable. The Department of Labor explains that ordinary home-to-work commuting and travel during the workday can receive different treatment under federal rules.
Review the actual arrangement and jurisdictions. Do not mark time nonbillable and then exclude it from payroll. Billing status has no authority over wage law.
Measure drive time accurately
Capture start, destination, job, and activity through timekeeping or telematics under a documented policy. Separate ordinary commuting where appropriate from travel between jobs, supply runs, warehouse trips, and required reporting locations.
Use consistent categories. If technicians code some drive time to jobs and leave other drive time blank, route and job profitability will be unreliable.
Calculate the cost of drive time
Include the technician’s burdened labor cost plus relevant vehicle operating cost. Add opportunity cost separately when drive time prevents another job from being completed.
For example, if a technician’s burdened cost is an illustrative $52 per paid hour and the vehicle’s operating cost is $0.80 per mile, a 45-minute, 25-mile one-way trip has direct labor and vehicle cost before the service begins. The precise result depends on which return travel and fixed costs the model includes.
Recover the cost without hiding the cause
Choose a recovery method
A service business can recover travel and nonbillable time through several approaches:
- A diagnostic, dispatch, trip, or service-call charge
- Minimum labor or minimum service price
- Flat-rate prices that include average travel
- Geographic zones or extended-area charges
- Hourly billing from a defined starting point where lawful and disclosed
- Maintenance-plan pricing that includes expected visits
- Commercial contract mobilization or travel terms
Use clear customer communication and applicable contract, consumer, and state rules. A fee name should describe what the customer agreed to pay.
Avoid charging every customer the same when cost differs materially
Average travel embedded in flat pricing is simple when the service area is compact. It can underrecover cost on remote calls and overprice nearby work when territory expands.
Analyze margin by zone, route, or distance band. The company may set service boundaries, zone charges, route days, or minimum job values for distant areas.
Recovering drive time through price
Assume technicians average 1.4 hours of nonbillable but compensable drive and field-support time per day. The selected burdened labor cost is $50 per hour. Across 220 workdays, the labor cost is an illustrative $15,400 per technician before vehicle cost.
If the technician completes four customer jobs per day, the company would need to recover about $17.50 per job to cover only that labor amount: $15,400 divided by 880 jobs. Vehicle cost, overhead, profit, job mix, and collection must still be added. This is a simplified hypothetical, not a client result.
Reduce the cost before pricing all of it
Improve route density, dispatch zones, first-call readiness, truck stocking, parts delivery, remote diagnosis, schedule windows, and technician home-base strategy where lawful and practical. Price should recover necessary cost, but process improvement can reduce the amount customers must support.
Track reschedules and empty travel. A poorly planned route is not a fixed market fact.
Connect time to job profitability
Assign drive and support time consistently to the job, route, department, or visible nonjob category. Then compare paid hours, productive hours, revenue, gross profit, and vehicle miles.
Use the fully burdened labor rate and fleet cost per mile rather than wage and fuel alone.
When pricing hides a routing problem
Common mistakes include treating nonbillable as unpaid, using scheduled rather than actual travel, applying one wide-area fee without zone analysis, excluding return or supply travel, and adding a visible fee while also double counting the same cost in price.
Pricing is only one response. Excessive drive time may show that the company needs to change territory, routing, staffing, dispatch, or the kind of jobs it accepts.
Monthly review
- Paid, productive, drive, shop, training, and leave hours
- Drive time and miles per completed job
- Revenue and gross profit by zone or route
- Service charges, discounts, and waivers
- Callbacks and return trips
- Recovered versus estimated nonbillable cost
- Territories or dispatch patterns needing action
Test price recovery by zone
Group completed calls by distance band or dispatch zone. For each group, calculate average paid drive time, vehicle miles, productive time, realized revenue, direct cost, gross profit, service charges, discounts, and callbacks. Compare the result with the amount the pricing model expected to recover.
If a remote zone produces adequate job margin but low contribution per technician day, route density may be the issue. If both measures are weak, price, service boundary, minimum job, or customer mix may need to change.
Account for canceled and no-access calls
Technician travel can produce no invoice when a customer cancels late, is not present, or access is unavailable. Track those events separately from normal drive time. Review confirmation procedures, cancellation terms, deposits, route recovery, and customer communication under applicable law.
Do not spread an avoidable cancellation cost across all customers without first improving the control that caused it.
Use pricing and accounting that tell the same story
If the price book includes an embedded travel allowance, document the assumption and avoid adding the same standard amount again as direct job cost without intending to. If invoices show a separate trip charge, map it consistently so management can compare revenue recovered with travel cost.
Review discounts and waived charges. A policy can be economically sound while repeated overrides erase its effect. Report the override by reason and approver, then include it in realized-price analysis.
Use a capacity waterfall
Begin with paid hours, then subtract paid leave and other unavailable time to reach available hours. Separate productive job time from training, meeting, shop, and idle time. Within job time, distinguish work priced directly, drive time recovered indirectly, warranty or callback time, estimates, and other categories relevant to the service model.
The published professional-services accounting guide shows how time, projects, billing, and margin connect. A field-service company should also compare dispatch geography, first-time fix rate, job duration, and pricing method before blaming technicians for nonbillable drive time.
Illustratively, if a technician has 32 productive hours in a paid 40-hour week, the remaining eight hours still cost the business. The recovery decision belongs in pricing and routing. The percentage alone does not prove that the eight hours were avoidable or that every one should appear on a customer invoice.
Educational information only. Tax, payroll, and compliance rules change and may vary by jurisdiction. Confirm the current requirements for your facts with the appropriate agency or a qualified professional.
If paid time is tracked but pricing does not recover necessary nonbillable work, Steady can build the capacity view through its financial reporting and KPI service.
Frequently asked questions
Is nonbillable time unpaid?
No. Billable is a customer-pricing label. Compensability depends on applicable wage-and-hour rules and the actual activity.
Can I charge customers for drive time?
A business can structure pricing to recover travel cost, subject to clear agreements and applicable laws. The method can be a fee, minimum, zone, hourly term, or embedded price.
Should drive time be assigned to a job?
Assign it consistently to the job, route, or a visible support category based on the management reporting design.
How do I calculate drive-time cost?
Combine selected burdened labor cost, vehicle cost, and any separately evaluated opportunity cost for the relevant time and miles.
What if customers reject a trip charge?
Test alternative presentation and pricing structures, service boundaries, route density, and minimum job values while preserving required disclosures.
Can better dispatch improve gross margin?
Yes. More route density and fewer unplanned trips can increase productive capacity without adding technicians.
Turn this guide into action