Form CMB-005 Cost analysis
Labor Burden Rate Calculator
When you pay an employee $25 per hour, the true cost to your business is nowhere near $25. Add FICA taxes at 7.65%, workers compensation insurance that ranges from 3% for electricians to 12% for roofers, health insurance premiums, retirement matching, paid time off, and miscellaneous benefits, and that $25 employee costs $35 to $48 per hour depending on your trade and benefits package. Labor burden is the gap between what you pay and what it actually costs. If you set your billing rates based on the base wage alone, you are losing money on every hour your employees work. This calculator breaks down every component of labor burden for your specific trade and benefits structure, showing you the burdened hourly rate, the burden percentage, and the annual cost per employee.
✓ How It Works
Labor burden includes every cost on top of an employee's base wage that you pay as an employer. The calculator starts with the base hourly wage, then adds FICA taxes (Social Security and Medicare at 7.65% of wages), workers compensation insurance (which varies dramatically by trade: 3.8% for electricians, 12% for roofers), health insurance converted to an hourly figure, retirement matching as a percentage of wages, paid time off spread across worked hours, and any other monthly benefit costs divided by working hours. The result is the fully burdened rate: the real cost per hour of having that employee on a job site.
The burden percentage shows how much the extras add as a proportion of base wage. A 40% burden rate means a $25/hr employee truly costs $35/hr. This number should be the basis of your billing rate, not the base wage.
✓ When to Use This
Calculate labor burden before hiring your first employee to understand the true cost difference between subcontracting and employing. Recalculate every time insurance premiums change, which for most contractors is annually. Use the burdened rate when building job estimates so your labor line items reflect reality. If you manage multiple employees at different pay levels, run the calculation for each to get an accurate average. Contractors who skip burden calculation consistently underprice labor-heavy jobs and wonder why profit disappears.
✓ Frequently Asked Questions
What is labor burden and why does it matter for contractors?
Labor burden is the total cost of an employee beyond their base wage. It includes employer-paid taxes, insurance premiums, benefits, and paid time off. For contractors, labor burden typically adds 30-50% on top of the base wage. A $30/hr employee might really cost $39-45/hr. If you quote jobs based on the $30 rate, you lose $9-15 for every hour that employee works. Understanding labor burden is essential for accurate job costing and sustainable pricing.
How much does workers comp insurance add to labor cost?
Workers compensation rates vary significantly by trade and state. Electricians typically pay 3-5% of payroll. Plumbers run 4-6%. HVAC technicians pay 4-5%. Painters are 5-7%. Landscapers run 5-8%. Roofers pay the most at 10-15% due to fall risk. These rates are set by your state workers comp board and your company's claims history. A clean safety record can earn you a lower experience modifier, reducing your rate over time.
What is a typical burden rate for construction trades?
Most construction trades see a total burden rate between 30% and 50% of base wages. At the low end, a trade with minimal workers comp and no health benefits might see 25-30%. At the high end, a roofing company offering full benefits could see 50-60%. The national average across all construction trades is approximately 35-40%. Your specific rate depends on your trade, state, and benefits package.
Should I include paid time off in my labor burden?
Absolutely. Paid time off is a real cost that reduces the hours available for billing while maintaining full wages. If you offer 10 days PTO per year, that is 80 hours of wages paid without any revenue generated. Spreading that cost across all worked hours accurately reflects the true per-hour employment cost. Omitting PTO from burden calculations creates a hidden subsidy that erodes your margins.
How does labor burden differ between trades?
The biggest variable is workers compensation insurance, which ranges from about 3% for office-based trades to 12%+ for high-risk work like roofing. Trade-specific certifications and continuing education add costs for electricians and HVAC technicians. Tool and equipment requirements vary: an HVAC tech needs specialized diagnostic equipment, while a painter's tool costs are lower. Health insurance costs are similar across trades but vary by company size and plan selection.