Overhead & ProfitCalculator

Overhead and profit (O&P) is a two-component markup applied to direct costs in construction pricing and insurance claims. Overhead covers the cost of running the business — office, management, vehicles, insurance, tools, and administration — typically 10–20% of direct costs. Profit is the net return to the business owner, typically 5–15%. They are calculated separately because overhead is a cost recovery (not profit) and treating them as one number leads to underpricing when direct costs are high.

Most UK general contractors apply 10–20% overhead and 5–15% profit on direct costs, giving a combined O&P of 15–35%. Specialist trades (electrical, mechanical) often apply lower overhead (8–12%) because their direct labour is highly skilled and margins are tighter. Large commercial contractors may apply 5–10% overhead if they carry high fixed costs that are spread across many projects. For insurance reinstatement work, 10% overhead + 10% profit (20% combined) is a common benchmark.

A standard markup adds a single percentage to cost to get a sell price. O&P splits this into two separate percentages: overhead is applied to direct costs first, then profit is applied to the (direct costs + overhead) subtotal. This matters because it changes the order of operations and gives more transparency in cost-plus and insurance pricing. The calculator above shows both the combined O&P amount and how it splits between overhead recovery and profit.

O&P pricing is standard in three situations: cost-plus contracts (where the client pays actual costs plus agreed percentages), insurance reinstatement work (loss adjusters and insurers use O&P to assess fair contractor charges), and JCT and NEC construction contracts where overhead and profit are priced separately in the contract sum. For straightforward domestic quoting, a single markup or margin percentage is usually simpler.

UK builders typically use 12–18% overhead on direct costs. This covers: site supervision (3–5%), van and plant (2–4%), insurance and guarantees (2–3%), tools and small plant (1–2%), office/admin (2–4%), and miscellaneous (1–2%). Sole traders working without employees carry lower overhead (8–12%) because they have fewer fixed costs. Larger contractors running multiple sites simultaneously need higher overhead percentages to cover management and coordination costs.

Yes — loss adjusters and insurers calculate fair contractor charges using O&P. The standard benchmark in UK insurance reinstatement work is typically 10–15% overhead + 10% profit, applied to the schedule of rates or direct repair costs. If an insurer is querying your contractor's margin, use this calculator to show how the O&P is split and that the percentages are within market norms. Always document your overhead costs to support higher percentages if challenged.