# What Is Labor Burden?

Labor burden is every cost an employer pays for an employee on top of gross wages: payroll taxes, unemployment insurance, workers' comp, health insurance, retirement contributions and other benefits. Labor burden rate = annual burden costs ÷ annual wages × 100. A tech earning $62,400 who costs $16,788 more in burden has a 26.9% burden rate.

## Key takeaways

- Labor burden is the gap between what you pay an employee and what that employee really costs you.
- In 2026 the employer pays 6.2% Social Security (on wages up to $184,500) and 1.45% Medicare on every wage dollar, plus federal and state unemployment tax.
- Workers' comp and state unemployment rates vary by state, by job classification and by your claims history, so get yours from your carrier and your state.
- Federal data puts benefits at 30.5% of total compensation in the construction industry, which equals about 44% on top of wages.
- Price from cost per billable hour, not cost per paid hour. Non-billable time is the hidden part of labor burden that most owners miss.

## How does labor burden work?

Labor burden works by adding up everything you spend because a person is on your payroll, beyond the wage on their check, and expressing it as a percentage of wages. That percentage turns a tech's $30 wage into the real hourly cost you have to recover in your prices. Skip it and every job you quote is priced on a number that's too low.

Burden splits into two kinds. **Required costs** are set by law: the employer share of Social Security and Medicare, federal unemployment tax (FUTA), state unemployment tax (SUTA) and, in almost every state, workers' compensation insurance. **Discretionary costs** are the ones you choose to offer: health insurance, retirement match, paid time off, uniforms, phones, tools allowances and training.

**What goes into labor burden (2026 figures where set by federal law)**

| Cost | Rate or how it's set | Source |
| --- | --- | --- |
| Social Security (employer share) | 6.2% of wages, up to a $184,500 wage base for 2026 | [IRS Topic 751](https://www.irs.gov/taxtopics/tc751) |
| Medicare (employer share) | 1.45% of all wages, no wage cap | [IRS Topic 751](https://www.irs.gov/taxtopics/tc751) |
| Federal unemployment (FUTA) | 6.0% on the first $7,000 per employee; 0.6% after the maximum 5.4% credit for state unemployment tax paid | [IRS Topic 759](https://www.irs.gov/taxtopics/tc759) |
| State unemployment (SUTA) | Set by your state, based on your industry and layoff history, on a state wage base | Your state workforce agency |
| Workers' compensation | Premium per $100 of payroll, by job classification and state; field trades rate much higher than office work | Your insurance carrier or state fund |
| Health insurance, retirement match | Whatever your plan costs the company | Your plan documents |
| Paid time off and holidays | Wages paid for hours nobody works on a job | Your PTO policy |
| Uniforms, phones, tools, training, licenses | Your actual spend per employee | Your books |

_Federal rates verified 2026-10-12. This is general information, not tax advice; your payroll provider or CPA can confirm what applies to you. See [payroll taxes](https://www.brix.so/learn/payroll-taxes) and [workers' compensation](https://www.brix.so/learn/workers-compensation) for more._

**Labor burden formulas**

```
Labor burden rate = Annual burden costs ÷ Annual wages × 100   |   Cost per billable hour = (Wages + Burden) ÷ Billable hours
```

Where:
- Annual burden costs = employer payroll taxes, unemployment, workers' comp, benefits and other per-employee costs
- Annual wages = gross pay, including paid time off
- Billable hours = hours actually sold to customers in a year (see [billable hours](https://www.brix.so/learn/billable-hours))

> **Worked example: the true cost of a $30-an-hour HVAC tech**
>
> Illustrative numbers, except the federal tax rates. A tech earns $30 an hour for 2,080 paid hours (40 hours × 52 weeks, PTO included): **$62,400** in wages.
>
> Social Security and Medicare at 7.65% = $4,773.60. FUTA at 0.6% of $7,000 = $42. Say state unemployment comes to $400 and the workers' comp premium to $2,500 for this classification.
>
> Health insurance (employer share) $7,200 and a 3% retirement match of $1,872.
>
> Total burden = **$16,787.60**. Burden rate = $16,787.60 ÷ $62,400 = **26.9%**.
>
> Fully loaded cost = $79,187.60, or **$38.07 per paid hour**. If the tech bills 1,300 hours a year, the real cost is **$60.91 per billable hour**, more than double the wage.

The [labor burden calculator](https://www.brix.so/tools/labor-burden-calculator) runs this for each employee, and the [true cost of an employee calculator](https://www.brix.so/tools/payroll-cost-calculator) adds hiring and overhead costs on top.

## What is a typical labor burden rate?

Federal data shows benefits running about 30% of total compensation for trades workers. In the June 2026 Employer Costs for Employee Compensation survey, private construction-industry employers paid an average of $36.13 an hour in wages and $15.84 in benefits, so benefits were 30.5% of compensation. Measured against wages, the way most owners figure burden, that's about 44%.

**Employer costs per hour worked, private industry, June 2026**

| Group | Wages | Benefits | Benefits as % of compensation | Benefits as % of wages |
| --- | --- | --- | --- | --- |
| Construction industry | $36.13 | $15.84 | 30.5% | 43.8% |
| Installation, maintenance and repair occupations | $33.61 | $15.41 | 31.4% | 45.8% |
| Construction and extraction occupations (with farming, fishing, forestry) | $32.17 | $14.47 | 31.0% | 45.0% |

_Source: BLS Employer Costs for Employee Compensation, Table 4, released September 9, 2026. "Benefits as % of wages" is calculated from the BLS figures. BLS counts paid leave as a benefit, so these rates include PTO._

Legally required benefits alone (payroll taxes, unemployment insurance and workers' comp) averaged $4.42 an hour in the construction industry, about 12% of wages. Everything above that is benefits you choose to offer, so small shops with few benefits often land well below the 44% average. Your own rate is the only one that matters for pricing. Pull it from last year's payroll and insurance records.

## Labor burden by trade

Wages, injury risk and the way crews work all change the burden picture. The table pairs each trade's median wage from the Bureau of Labor Statistics with an illustrative 35% burden to show the hourly cost before any non-billable time.

**Median wage and illustrative burdened cost by trade**

| Trade | BLS median hourly wage (May 2025) | Cost per hour at an illustrative 35% burden | What pushes burden up |
| --- | --- | --- | --- |
| HVAC | $29.33 | $39.60 | On-call pay, seasonal overtime, certification training |
| Plumbing | $30.67 | $41.40 | On-call and emergency premiums, license renewals |
| Electrical | $30.38 | $41.01 | Continuing education for licenses, apprentice ratios on jobs |
| Roofing | $26.65 | $35.98 | Fall risk makes workers' comp a large share; weather days still cost you |
| Landscaping | $19.27 | $26.01 | Seasonal hiring and turnover, equipment injury risk |
| Cleaning | $17.71 | $23.91 | High turnover means more hiring and training cost per hour worked |

_Wages are BLS Occupational Outlook Handbook medians (HVAC mechanics and installers; plumbers, pipefitters and steamfitters; electricians; roofers; grounds maintenance workers; janitors and building cleaners). The 35% burden is an example, not a measured rate for each trade._

## Labor burden vs. overhead

Labor burden is tied to a specific employee and rises and falls with headcount and hours. [Overhead](https://www.brix.so/learn/overhead) is the cost of running the business whether or not anyone is on a job: rent, office staff, trucks, insurance and software. For a field tech, burden belongs in job cost next to wages, which is why it shows up in your [gross margin](https://www.brix.so/learn/gross-margin). Office staff burden belongs in overhead with their wages.

## Labor burden vs. a 1099 subcontractor

A 1099 subcontractor doesn't carry employer payroll taxes or benefits, so their hourly price looks higher but includes their own burden. Compare a sub's rate with your employee's cost per billable hour, not their wage. Whether someone can be treated as a contractor is a legal question with its own rules; see [W-2 vs. 1099](https://www.brix.so/learn/w2-vs-1099).

## Common labor burden mistakes

- **Pricing from the wage.** $30 an hour is what the tech earns, not what the tech costs.
- **Stopping at payroll taxes.** FICA and unemployment are only part of it. Workers' comp, health insurance and PTO are often bigger.
- **Using one burden rate for everyone.** A roofer and an office manager sit in very different workers' comp classes.
- **Dividing by paid hours.** You only get paid for billable hours. Divide fully loaded cost by [billable hours](https://www.brix.so/learn/billable-hours) to price correctly.
- **Forgetting the Social Security cap and FUTA wage base.** Both stop accruing at a wage limit, so the rate per hour falls later in the year. Annual math avoids that distortion.
- **Not updating it.** Insurance renewals, raises and new benefits change your rate. Recalculate at least once a year.

BRIX tracks crew clock-ins and job hours on payroll-ready timesheets and keeps expenses categorized, so you can see what each job really cost in labor, not just what the wage line says.

- [Crew timesheets](https://www.brix.so/#use-cases): Clock-ins, job hours and payroll-ready timesheets.
- [Bookkeeping and tax help](https://www.brix.so/features/bookkeeping-taxes): Keeps expenses categorized, tracks 1099 subcontractors and sales tax, and reminds you of quarterly estimated tax dates. BRIX does not file taxes or give tax advice.
- [QuickBooks sync](https://www.brix.so/integrations/quickbooks): Syncs customers, invoices and payments with QuickBooks so the books match the jobs.

## Frequently asked questions

### How do you calculate labor burden?

Add up a year of employer costs for an employee beyond wages: Social Security and Medicare, unemployment taxes, workers' comp, health insurance, retirement match and other benefits. Divide that total by the employee's annual wages and multiply by 100. $16,788 of burden on $62,400 of wages is a 26.9% burden rate.

### What is included in labor burden?

Employer payroll taxes (6.2% Social Security and 1.45% Medicare in 2026), federal and state unemployment tax, workers' compensation, health and other insurance, retirement contributions, and paid time off. Many shops also include uniforms, phones, tools allowances, training and licensing costs.

### Is labor burden 30%?

Sometimes, but it's not a rule. Federal survey data for June 2026 shows benefits at 30.5% of total compensation in the construction industry, which is about 44% on top of wages. Small shops with few benefits may run lower. Use your own payroll and insurance costs.

### How is HVAC labor cost calculated?

Start with the tech's wage, add labor burden for the true cost per paid hour, then divide by billable hours rather than paid hours. A $30-an-hour tech with a 26.9% burden costs $38.07 per paid hour, and $60.91 per billable hour if 1,300 of 2,080 paid hours are billed.

### Is workers' comp part of labor burden?

Yes. Workers' comp is required for employees in almost every state and is priced per $100 of payroll by job classification, so it's a direct cost of each field employee. Trades with higher injury risk, such as roofing, usually pay much more per $100 of payroll than office classifications.

### Does labor burden include paid time off?

It should. Holiday, vacation and sick pay are wages for hours when nobody is working on a job, so they raise your cost per productive hour. You can count PTO as burden, as the BLS does, or keep it in wages and divide by billable hours; just don't count it twice.

### Do 1099 contractors have labor burden?

Not for you as the hiring company. A 1099 subcontractor pays their own self-employment tax and insurance and builds it into their price. That's why a sub's hourly rate should be compared with your employee's fully loaded cost per billable hour, not their wage.

## Related

- [What Are Billable Hours?](https://www.brix.so/learn/billable-hours)
- [What Is Technician Utilization?](https://www.brix.so/learn/technician-utilization)
- [What Is Overhead, and How Do Contractors Calculate It?](https://www.brix.so/learn/overhead)
- [What Are Payroll Taxes?](https://www.brix.so/learn/payroll-taxes)
- [What Is Workers' Compensation Insurance?](https://www.brix.so/learn/workers-compensation)
- [W-2 vs. 1099: What's the Difference for Contractors?](https://www.brix.so/learn/w2-vs-1099)
- [Labor Burden Calculator](https://www.brix.so/tools/labor-burden-calculator)
- [True Cost of an Employee Calculator for Trades Businesses](https://www.brix.so/tools/payroll-cost-calculator)
- [How Much to Charge per Hour as a Contractor](https://www.brix.so/tools/contractor-hourly-rate-calculator)
- [How to Hire Technicians and Build a Pay Plan That Works](https://www.brix.so/guides/hire-and-pay-technicians)

## Sources

- [IRS — Topic No. 751, Social Security and Medicare withholding rates](https://www.irs.gov/taxtopics/tc751) (checked 2026-10-12)
- [IRS — Topic No. 759, Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return](https://www.irs.gov/taxtopics/tc759) (checked 2026-10-12)
- [BLS — Employer Costs for Employee Compensation, Table 4 (June 2026)](https://www.bls.gov/news.release/ecec.t04.htm) (checked 2026-10-12)
- [BLS — Occupational Outlook Handbook: Heating, Air Conditioning, and Refrigeration Mechanics and Installers](https://www.bls.gov/ooh/installation-maintenance-and-repair/heating-air-conditioning-and-refrigeration-mechanics-and-installers.htm) (checked 2026-10-12)
- [BLS — Occupational Outlook Handbook: Plumbers, Pipefitters, and Steamfitters](https://www.bls.gov/ooh/construction-and-extraction/plumbers-pipefitters-and-steamfitters.htm) (checked 2026-10-12)
- [BLS — Occupational Outlook Handbook: Electricians](https://www.bls.gov/ooh/construction-and-extraction/electricians.htm) (checked 2026-10-12)
- [BLS — Occupational Outlook Handbook: Roofers](https://www.bls.gov/ooh/construction-and-extraction/roofers.htm) (checked 2026-10-12)
- [BLS — Occupational Outlook Handbook: Grounds Maintenance Workers](https://www.bls.gov/ooh/building-and-grounds-cleaning/grounds-maintenance-workers.htm) (checked 2026-10-12)
- [BLS — Occupational Outlook Handbook: Janitors and Building Cleaners](https://www.bls.gov/ooh/building-and-grounds-cleaning/janitors-and-building-cleaners.htm) (checked 2026-10-12)

---
Written by BRIX Editorial Team. Last updated 2026-10-12. General information, not tax, legal or financial advice.
Canonical: https://www.brix.so/learn/labor-burden