What Is a Blended Hourly Rate?
A blended hourly rate is the average hourly price of a team made up of people with different roles or seniority levels. Instead of quoting each person separately, the provider gives one rate for the whole group.
Blended rates simplify budgeting and make it easier to compare vendors, as long as you also know the mix of roles behind the number.
How do you calculate a blended hourly rate?
Formula
Blended rate = total cost of all team members divided by total hours worked.
Example
A team has one senior engineer at 60 per hour working 40 hours, and two junior engineers at 30 per hour working 40 hours each. Total cost is 2,400 plus 2,400, which is 4,800. Total hours are 120. The blended rate is 4,800 divided by 120, or 40 per hour.
Why do companies use blended rates?
- One simple rate for budgeting and proposals
- Easy comparison between vendors
- Flexibility to change the mix of seniority without renegotiating
- Clear forecasting for long engagements
What are the downsides?
- The rate can hide the mix of senior and junior people
- A low rate may mean a more junior team
- Changes in team composition change the real cost
- It can make it harder to see the price of individual roles
Ask for the role mix behind any blended rate, and check whether it can change during the engagement.
Blended rate vs fixed rate vs role-based rate
- Blended rate: one average rate for the team
- Fixed rate: the same price for every worker or task
- Role-based rate: a separate rate for each role or seniority level
Role-based rates give the most transparency. Blended rates give the most simplicity.
Want clear, transparent pricing for a team in Latin America? Talk to Lupa Hire about your roles and budget.
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