# 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.

## Key takeaways

- Labor burden rate = (payroll taxes + workers' comp + insurance + benefits + other costs) ÷ wages.
- For 2026 the employer pays 6.2% Social Security on wages up to $184,500, 1.45% Medicare on all wages, and FUTA on the first $7,000.
- Workers' comp, state unemployment and health insurance vary by state, class code and plan; use your own policy numbers.
- Price labor on cost per billable hour, not per paid hour. Paid time off and drive time spread the cost over fewer hours.

## 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](https://www.brix.so/learn/labor-burden).

**Formula**

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

Where:
- G = gross annual wages (hourly wage × paid hours, including PTO)
- T = employer payroll taxes: Social Security, Medicare, FUTA, state unemployment
- W = workers' compensation premium
- B = benefits: health insurance, retirement match
- O = other employee costs: uniforms, phone, tools, training
- H = billable hours: (paid hours − PTO hours) × billable share

## 2026 employer payroll tax rates

**Federal employer payroll taxes for 2026**

| Tax | Employer rate | Wages it applies to | Max per employee |
| --- | --- | --- | --- |
| Social Security (OASDI) | 6.2% | First $184,500 | $11,439 |
| Medicare (HI) | 1.45% | All wages | No cap |
| FUTA (after max state credit) | 0.6% | First $7,000 | $42 |
| State unemployment (SUTA) | Set by your state | Your state's wage base | Varies |

_Sources: IRS Topic 751 (Social Security and Medicare) and IRS Topic 759 (FUTA), verified 2026-10-12. FUTA is 6.0% before the up-to-5.4% credit for state unemployment tax paid; employers in credit-reduction states pay more. The 0.9% Additional Medicare Tax is withheld from the employee, not paid by the employer._

## How to calculate labor burden

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. **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](https://www.brix.so/learn/payroll-taxes).
3. **Add workers' comp.** Your policy lists a rate per $100 of payroll for each class code. Multiply wages ÷ 100 × rate. See [workers' compensation](https://www.brix.so/learn/workers-compensation).
4. **Add benefits and other costs.** Employer health premiums × 12, retirement match, plus uniforms, phones, hand tools, training and license fees.
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.

> **Worked example: a $30-an-hour service tech**
>
> Wages: $30 × 2,080 hours = $62,400.
>
> Payroll taxes: Social Security $3,868.80, Medicare $904.80, FUTA $42, state unemployment $360 (3.0% on the first $12,000, an example rate). Total $5,175.60.
>
> Workers' comp at $6 per $100: $3,744. Health insurance at $500 a month: $6,000. 3% retirement match: $1,872. Uniforms, phone and training: $1,500.
>
> Burden: $18,291.60, a **29.3% burden rate**. Total cost: $80,691.60, or $38.79 per paid hour.
>
> Take out 120 hours of PTO and the tech works 1,960 hours. At 75% billable, that's 1,470 billable hours, so each one costs **$54.89**, 1.83× the wage.

## 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.

**Median wage and estimated cost per billable hour**

| Trade | BLS occupation | Median wage (May 2025) | Burden rate | Cost per billable hour |
| --- | --- | --- | --- | --- |
| Electrical | Electricians | $30.38 | 29.2% | $55.52 |
| Plumbing | Plumbers, pipefitters and steamfitters | $30.67 | 29.0% | $56.00 |
| HVAC | HVAC and refrigeration mechanics and installers | $29.33 | 29.6% | $53.79 |
| Roofing | Roofers | $26.65 | 30.9% | $49.36 |
| Painting | Construction and maintenance painters | $23.75 | 32.6% | $44.58 |
| Landscaping | Grounds maintenance workers | $19.27 | 36.4% | $37.18 |
| Cleaning | Janitors and building cleaners | $17.71 | 38.1% | $34.61 |

_Median hourly pay from the BLS Occupational Outlook Handbook (May 2025 data), verified 2026-10-12. Other inputs match the worked example, including workers' comp held at $6 per $100 for every row so the rows compare; your real comp rate depends on your state and class code. Lower wages show a higher burden rate because health insurance is a fixed dollar cost._

## 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](https://www.brix.so/tools/job-pricing-calculator), or carry it into the [contractor hourly rate calculator](https://www.brix.so/tools/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](https://www.brix.so/tools/payroll-cost-calculator).

BRIX tracks crew timesheets against jobs and syncs to QuickBooks, so you can see which hours were billable and what each job's labor really cost.

- [Crew timesheets](https://www.brix.so/#use-cases): Clock-ins, job hours and payroll-ready timesheets.
- [QuickBooks sync](https://www.brix.so/integrations/quickbooks): Syncs customers, invoices and payments with QuickBooks so the books match the jobs.
- [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.

## Frequently asked questions

### How do you calculate labor burden?

Add up everything you pay for an employee beyond wages: employer payroll taxes, workers' comp, health insurance, retirement contributions and other costs. Divide that total by their annual wages to get the burden rate. Add it to wages and divide by billable hours to get the true cost per hour.

### What is a normal labor burden rate?

It depends heavily on benefits and workers' comp. BLS data for June 2026 shows construction employers paying benefits equal to about 44% of wages, including paid leave. A small shop with no health plan may land in the teens from payroll taxes and workers' comp alone. Calculate your own rather than borrowing a percentage.

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

Yes. Workers' compensation insurance is usually one of the largest burden items for field trades. Premiums are charged per $100 of payroll by class code, and rates differ widely between class codes, so field and office payroll are priced separately.

### What payroll taxes does an employer pay in 2026?

Employers pay 6.2% Social Security on each employee's wages up to $184,500, 1.45% Medicare on all wages, federal unemployment (FUTA) of 6.0% on the first $7,000 (usually 0.6% after the state credit), and state unemployment at a rate set by the state.

### Should paid time off be included in labor burden?

Yes, one way or the other. This calculator pays wages for all 2,080 hours, then removes PTO hours from the hours worked, so the cost per worked and billable hour rises. Some shops instead add PTO pay as a burden percentage. Don't count it both ways.

### Does labor burden apply to 1099 subcontractors?

Not in the same way. You don't pay payroll taxes or benefits for genuine independent contractors, but you may still pay for workers' comp if they lack their own coverage. Misclassifying employees as contractors can trigger back taxes and penalties. Compare costs with the [1099 vs. W-2 calculator](https://www.brix.so/tools/1099-vs-w2-calculator).

## Related

- [What Is Labor Burden?](https://www.brix.so/learn/labor-burden)
- [What Are Payroll Taxes?](https://www.brix.so/learn/payroll-taxes)
- [What Is Workers' Compensation Insurance?](https://www.brix.so/learn/workers-compensation)
- [What Are Billable Hours?](https://www.brix.so/learn/billable-hours)
- [How Much to Charge per Hour as a Contractor](https://www.brix.so/tools/contractor-hourly-rate-calculator)
- [True Cost of an Employee Calculator for Trades Businesses](https://www.brix.so/tools/payroll-cost-calculator)
- [Job Pricing Calculator for Contractors](https://www.brix.so/tools/job-pricing-calculator)
- [1099 vs. W-2 Cost Calculator: Employee or Subcontractor?](https://www.brix.so/tools/1099-vs-w2-calculator)
- [How to Hire Technicians and Build a Pay Plan That Works](https://www.brix.so/guides/hire-and-pay-technicians)
- [Maintenance Agreement Pricing Calculator](https://www.brix.so/tools/maintenance-agreement-calculator)

## 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, June 2026, Table 4 (private industry by industry group)](https://www.bls.gov/news.release/ecec.t04.htm) (checked 2026-10-12)
- [BLS Occupational Outlook Handbook: Electricians (median pay, May 2025)](https://www.bls.gov/ooh/construction-and-extraction/electricians.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: HVAC 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: Roofers](https://www.bls.gov/ooh/construction-and-extraction/roofers.htm) (checked 2026-10-12)
- [BLS Occupational Outlook Handbook: Painters, construction and maintenance](https://www.bls.gov/ooh/construction-and-extraction/painters-construction-and-maintenance.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)

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