Labor Burden Calculator

Labor burden is everything an employee costs beyond the wage: employer payroll taxes, workers' comp, insurance, retirement and other benefits. Burden rate = total burden ÷ annual wages. A $30-an-hour tech in this example carries a 29.3% burden and costs $54.89 per billable hour once paid time off and unbillable time are counted.

What is labor burden?

Labor burden is the cost of employing someone on top of their gross wages. It includes the employer's share of payroll taxes, workers' compensation insurance, health insurance, retirement contributions and costs like uniforms, phones and training. Contractors who price labor at the wage are missing every one of those dollars. For the full definition, see labor burden.

Burden rate = (T + W + B + O) ÷ G    Cost per billable hour = (G + T + W + B + O) ÷ H

2026 employer payroll tax rates

How to calculate labor burden

1. 1

   Start with annual wages.

   Hourly wage × paid hours. A full-time year is 2,080 hours (40 × 52), and that includes holidays and vacation you pay for.

2. 2

   Add employer payroll taxes.

   Social Security at 6.2% up to the $184,500 wage base, Medicare at 1.45%, FUTA at 0.6% on the first $7,000, and your state unemployment rate on your state's wage base. See payroll taxes.

3. 3

   Add workers' comp.

   Your policy lists a rate per $100 of payroll for each class code. Multiply wages ÷ 100 × rate. See workers' compensation.

4. 4

   Add benefits and other costs.

   Employer health premiums × 12, retirement match, plus uniforms, phones, hand tools, training and license fees.

5. 5

   Divide by the hours that earn money.

   Subtract PTO hours to get hours worked, then multiply by the share that's billable. Total cost ÷ billable hours is the true labor cost to use in pricing.

What is a typical labor burden for contractors?

Federal data puts benefits for construction-industry workers at 43.8% on top of wages. In the Bureau of Labor Statistics' June 2026 employer cost survey, construction employers paid $36.13 an hour in wages and $15.84 in benefits: $4.42 legally required (payroll taxes and workers' comp), $3.90 insurance and $2.63 paid leave, with the rest in retirement plans and supplemental pay such as overtime premiums. That figure counts paid leave as a benefit, while this calculator handles PTO through hours. Small shops without health plans run lower; shops with full benefits and high comp rates run higher.

Labor burden by trade

Wages vary by trade, so the dollar cost of burden does too. The table runs each trade's national median wage through the worked example's other assumptions to show the true cost per billable hour. It's a starting point, not your number.

Common labor burden mistakes

• Stopping at payroll taxes. Social Security, Medicare and unemployment are only part of it. Workers' comp, insurance and paid time off are often bigger.
• Dividing by 2,080 hours. Nobody bills 2,080 hours. Dividing by paid hours understates the cost of every hour you can actually sell.
• Using the office class code for field workers. Workers' comp is rated by class code. If your audit reclassifies field payroll, the premium bill can jump at the end of the year.
• Forgetting the owner. If you work in the field, put a fair wage for yourself through the same math, or your prices only work while you work for free.
• Never updating it. Raises, new benefits and new rate notices change burden every year. Recalculate each January.

Use the cost per billable hour in the job pricing calculator, or carry it into the contractor hourly rate calculator to add overhead and profit. For a full employer cost including salaried staff, see the true cost of an employee calculator.