Labor Burden Calculator
Reviewed by Gerald G., founder & reviewing editor of CalcAuthority — journeyman cabinet installer, former subcontractor, and former contracting business owner who operated with 18 employees. The framing is from the field; every number comes from the stated formula.
The number on the paycheck is not what an employee costs you. Payroll taxes, workers' comp, liability insurance, benefits, and paid hours that never land on a job all sit on top of the wage — and if you bid using the raw wage, every labor hour you sell is underpriced before the truck leaves the yard. This calculator turns a wage into a fully burdened hourly labor cost: the number that answers the first operator question, what is this really costing me? It is the foundation for the Crew Cost, Break-Even Job Price, and Bid Check calculators, and it pairs with the Contractor Labor Burden field guide.
Advanced inputs (benefits, allowances, overhead, target margin)
How It Works
Three things push the true cost above the wage. First, percentage add-ons: employer payroll taxes (FICA, FUTA/SUTA), workers' compensation, and liability insurance are all charged as a percentage of wages. Second, fixed annual costs per employee: health insurance contributions, retirement match, small tools, phone, training fees — dollars that exist whether or not the employee is on a job. Third, and the one most estimators miss: non-productive paid hours. Holidays, PTO, shop time, weather days, and training are hours you pay for but cannot bill. Every dollar of annual cost has to be recovered across only the hours that actually land on jobs — so fewer productive hours means a higher true hourly cost.
The calculator totals the annual cost of employing the person, then divides by productive hours only. The result is the rate to use in every estimate. For what to include in the add-on percentage and how to find your workers' comp rate, see the labor burden guide.
Worked Examples
Example 1 — single employee: lead carpenter with benefits. Wage $28/hr, paid 2,080 hrs/yr. Payroll taxes 10%, workers’ comp 9%, liability 3% (22% combined). Benefits $4,800/yr, tool & phone allowance $1,800/yr. Non-productive paid hours: 250. Annual cost = ($28 × 2,080 × 1.22) + $4,800 + $1,800 = $71,053 + $6,600 = $77,653. Billable hours = 2,080 − 250 = 1,830. Burdened rate = $77,653 ÷ 1,830 = $42.43/hr — a 52% burden on a $28 wage. Bid this person at $28 and you lose $14.43 on every hour they work.
Example 2 — small crew / field tech, no health benefits. Service tech wage $24/hr, 2,080 paid hours. Payroll taxes 10%, comp 7%, liability 3% (20% combined). No health benefits, but a $3,600/yr truck, phone, and uniform allowance. Non-productive hours 300 (higher — windshield time between calls, restocking, callbacks). Annual cost = ($24 × 2,080 × 1.20) + $3,600 = $59,904 + $3,600 = $63,504. Billable hours = 1,780. Burdened rate = $63,504 ÷ 1,780 = $35.68/hr — about a 49% burden. The allowance and the lost windshield time, not taxes, are what push a $24 wage close to $36.
What This Result Means
The result is the minimum you must recover for every hour this person works on a job — before overhead and before profit. It is a cost floor, not a billing rate. Your billing rate needs this number plus an overhead share (see the Overhead Recovery Calculator) plus profit. If your current estimating rate is below this number, you are not making less profit than you thought — you may be paying to work.
Reading the Result
- Burdened rate under 1.25× wage: almost certainly missing a cost — check that payroll taxes, comp, and non-productive time are all included.
- 1.25×–1.5× wage: typical for lean crews with modest benefits.
- 1.5×–1.8× wage: common once health insurance and real PTO are in the picture.
- Above 1.8× wage: not necessarily wrong — but audit non-productive hours and fixed costs; a low productive-hours count inflates the rate fast.
These bands are editorial rules of thumb for reading your own result — they come from how the formula behaves at typical trade wage, tax, and insurance levels, not from a published survey. Your workers' comp class code and state rates can move the honest answer outside these bands.
When to Use This Calculator
Run this calculator:
- Before setting your estimating labor rate — once per employee classification (lead, journeyman, helper), then re-run when wages or insurance change.
- Before hiring — to see what the offer letter actually commits you to per productive hour.
- At insurance renewal — workers' comp and liability changes move this number and your bids should move with it.
- Before any bid built on labor hours — feed the result into the Crew Cost Calculator and the Bid Check Calculator.
How to use the result in your bids
The burdened rate is an input, not a price. Put it to work in three steps. First, pick the right classification — do not bid a helper’s hours at a lead’s rate or vice versa; run this calculator once per classification and keep the numbers on a card in the truck. Second, multiply burdened rate by the labor hours in the estimate to get true labor cost, then feed that into the Bid Check Calculator alongside materials, subs, and overhead. Third, once overhead and profit are layered on with the Break-Even Job Price Calculator, compare the finished bid against your gut number — if they are far apart, one of them is wrong, and it is usually the gut number.
For multi-person jobs, roll the individual burdened rates into a blended crew rate with the Crew Cost Calculator rather than averaging wages by hand.
Common mistakes contractors make
- Bidding at the wage. The single most expensive habit in the trades: using $28 in the estimate when the person costs $42 to put on the job.
- Dividing by paid hours instead of billable hours. Spreading annual cost over 2,080 hours instead of the hours that actually land on jobs understates the rate by 10–20%.
- Forgetting the allowance. Trucks, fuel, phones, and small tools are real per-employee costs. Left out, they quietly come out of profit.
- Confusing margin with markup. A 50% markup on cost is only a 33% gross margin. Enter the wrong one and every bid is off.
- Setting the rate once and never revisiting. Comp rates, wages, and insurance move every year; a two-year-old burdened rate is usually too low.
When not to rely on this calculator
This tool models a steady, straight-time year for one employee classification. Step outside that and treat the result as a starting point, not gospel: heavy overtime changes both the wage math and how fixed costs spread; deeply seasonal work (paid through a slow winter, slammed in summer) needs a season-weighted version; and prevailing-wage or union jobs carry fringe and reporting rules this does not capture. It is also a cost floor only — it deliberately excludes office overhead and profit, so never hand a customer this number as a price.
Limitations
- Uses one combined add-on percentage; it does not compute FICA, FUTA, SUTA, comp, and liability line by line.
- Assumes the wage and hours you enter are annual and steady; heavy seasonal swings need a season-weighted version.
- Does not include overhead (office, vehicles, advertising) — that is deliberately separate; recover it with the Overhead Recovery Calculator.
- Overtime changes the math: OT hours carry premium wages but also spread fixed costs further. This tool models straight time.
Frequently Asked Questions
What percentage should I use for the add-ons?
Build it from your own paperwork: employer FICA is 7.65% of wages, federal and state unemployment typically add roughly 1–4% depending on your state and rating, and workers' comp comes from your policy — it is quoted per $100 of payroll by class code, so a $9.50 rate means 9.5%. Liability insurance tied to payroll adds its share. Sum your actual components; for many trades the total lands between 18% and 35%, but pull the comp number from your declarations page rather than guessing.
What counts as non-productive hours?
Any hour you pay for that cannot be billed to a job: holidays, vacation and sick time, shop and yard time, loading and unloading, training, safety meetings, rained-out days you cover, and warranty work. Most full-time trade employees accumulate 150–350 such hours per year. Counting them is what separates this calculator from a simple wage-times-taxes estimate — those hours are why the burden is bigger than the tax percentages alone suggest.
Is drive time productive or non-productive?
It depends on whether you recover it. If your bids include travel to the job (directly or in your rate), treat paid drive time as productive. If you pay for drive time but never bill it, it is non-productive and belongs in that input. The important thing is consistency: do not bill it in your estimates and also exclude it here, or you will double-recover.