Well, labour rates should be worked out based on what it actually costs you to provide that labour, at that point, for that job.
In simple terms, all your overheads and direct costs, totalled, then divided by the number of hours you work in a year - usually around 2080.
This gives you a direct cost of labour assuming that you are actually charging every last working hour out. Most of us don't, and can't. After holidays, sickness, and other time off, there's typically around 220 working days in a year. That's around 1760 working hours. Then, most of us, in "one man" terms, actually work an average of 5 chargeable hours a day - the rest we give away one way and another. That means that your overheads/direct costs have to be paid for in as few as 1100 chargeable hours each year.
As an example - assume that rent, rates, cost of van, PC, tools, and so on cost you £10,000 per year. Divide that by 1100 and you get £9.09 per hour.
In other words, you need to earn £9.09 every working hour, just to stand still - and you need to make sure you have 1100 hours of chargeable work in each year too. On top of this, however, you need to pay salaries, taxes, and so on. So assume you pay yourself £20,000 per annum - and divide that by your 1100 hours too. That's another £18.18 per hour on top. So far, £27.27 per hour. Add a margin for taxes, and lower than expected working hours, say 25%. That brings you to around £34.08 per hour with a safe margin on your labour, also covering all your non-chargeable hours.
In this way, you know that your labour rate needs to be between £27 and £35 an hour to cover your costs with a safety margin to suit your working patterns.
Materials, then become effectively the "profit" element of what you make on a job - so can be managed accordingly.
