Labor Burden Calculator: What an Employee Really Costs
The wage is not the cost. Add payroll taxes, workers comp, liability and benefits, then divide by the hours you can actually bill, and a $28 an hour employee routinely costs $50 a billable hour. Estimating on the wage is how a busy company goes broke.
Worked example
These are the figures the calculator opens with and the answer it gives. Change anything above and every number below moves with it.
- Base hourly wage you pay28 $
- Workers comp rate9 %
- State and federal unemployment3 %
- General liability, as a payroll percent2 %
- Benefits, per hour2 $
- Productive hours out of every 86.5 hrs
True cost per billable hour$44.38
| Base wage | $28.00 /hr |
|---|---|
| FICA at 7.65% | $2.14 /hr |
| Workers comp at 9% | $2.52 /hr |
| Unemployment at 3% | $0.84 /hr |
| Liability at 2% | $0.56 /hr |
| Benefits | $2.00 /hr |
| Burdened cost, every paid hour | $36.06 /hr |
| Only 6.5 of 8 hours are billable | $44.38 /hrthis is what a billable hour actually costs you |
| Burden over base wage | 58.5% |
What this calculator assumes
- FICA is fixed at 7.65 percent, the employer half of Social Security and Medicare.
- Workers comp rates are set per trade and per state and swing enormously. Roofing can run over 25 percent where office work is under 1. Use your own rate off your policy.
- The productive hours field is the one everybody skips and it is the one that decides whether the job makes money. Drive time, loading, fuel stops and cleanup are paid and unbilled.
What sits on top of the wage
FICA is 7.65 percent, the employer half of Social Security and Medicare, and it is the same for everyone. Federal unemployment is small. State unemployment varies by state and by your own claims history.
Workers comp is the wild one. It is priced per trade class per state and the spread is enormous: clerical work can be under 1 percent of payroll while roofing in some states passes 25. Take your own rate off your own policy and do not use a national average.
General liability is often quoted as a percentage of payroll or receipts. Then benefits, whether that is health, a retirement match, a truck allowance, tools, or a phone.
The unbillable hours are the real burden
An employee on the clock for 8 hours does not put 8 hours on a job. Loading in the morning, driving between sites, the supply house run, fueling, cleanup, the safety meeting, the rained out afternoon. Six and a half billable hours out of eight is a realistic target and plenty of companies are worse.
That ratio is a multiplier on everything above it. At 6.5 of 8, every burdened dollar becomes $1.23 per billable hour. Combine the two and a $28 wage lands near $50 before a cent of overhead or profit.
This is the number to put in your job costing, not the wage. Almost every contractor who prices off the wage is unknowingly working at a loss on labor heavy work and covering it with material markup.
Questions people ask
What is labor burden?
Every cost of employing someone beyond their wage: payroll taxes, workers compensation, liability insurance, benefits and paid but unbillable time. It commonly runs 35 to 60 percent on top of the base wage.
How do I calculate the true cost of an employee?
Add payroll taxes, workers comp, liability and benefits to the wage to get the burdened hourly cost, then divide by the fraction of paid hours that are actually billable.
Is workers comp really that expensive?
In high risk trades, yes. Rates are set per class code per state and roofing, framing and tree work can exceed 25 percent of payroll in some states, while low risk classes sit under 2 percent.
Free Contractor Estimate Template, free, no signup, PDF Word and Excel.
Common sizes, worked out
The same calculator with the numbers already filled in, one page per size, each ending in its own material list.