Billable hour = salary cost + benefits + G&A + overhead
Where:
- Salary cost = gross salary / 1800 (or whatever # hours/yr your company uses)
- Benefits = proportional cost of vacation, 401K, etc
- G&A = General expenses and admin (office, equipment, free food, etc)
- Overhead = amount needed to cover everyone else who isn't billable (HR, Finance, IT, assistants, President, etc)
If you do the math, you'll see $200-300 is a standard rate in high cost markets (NYC, SFO) for someone with a six-digit figure. More junior positions are ~$150, while very senior roles (Partner, Director, etc) would be in the $300-500 range.
You need one of each these people for every N developers (different value of N for different classes of service). Therefore the cost of having you includes the 1/N cost of each of these people.
If you are client-facing consultant, your billable rate is paying:
- Your salary
- Your benefits
- Your expenses (travel, per diem, equipment, software, anything else)
- And then... Salary, benefits, expenses of all your NON-client-facing teammates: Salespeople, marketing, management, client relationship, administrative, HR, etc.
So as a consultant, you are the product, and as such have to be sold at a price that nets enough profit to pay for rest of the organization.
Normally when they say "you cost $150/hour", what they mean is, "you, and all the support framework behind you, needs to be billed at $150/hour to pay off".
Hope that helps. If you're in-house developer and not client-facing, it's harder to understand and justify cost figures, but typically would be nowhere near that rate...
Or maybe just really, really bad at your job?
I've never been able to figure out how my employer says I cost them $280 per hour.