What Does a $16 an Hour Employee Actually Cost?
True cost per billable hour
$26.42
At 9% workers comp, 3% unemployment, 2% liability, $2 an hour of benefits and 6.5 billable hours in an 8 hour day.
How that number is worked out
These are the figures this page was built with and every line the calculator produces from them. Change anything above and all of it moves.
- Base hourly wage you pay16 $
- 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$26.42
| Base wage | $16.00 /hr |
|---|---|
| FICA at 7.65% | $1.22 /hr |
| Workers comp at 9% | $1.44 /hr |
| Unemployment at 3% | $0.48 /hr |
| Liability at 2% | $0.32 /hr |
| Benefits | $2.00 /hr |
| Burdened cost, every paid hour | $21.46 /hr |
| Only 6.5 of 8 hours are billable | $26.42 /hrthis is what a billable hour actually costs you |
| Burden over base wage | 65.1% |
Billable hours in an 8 hour day compared
The productive hours field is the one everybody skips, and it moves the true cost more than any tax rate does.
| Billable hours in an 8 hour day | True cost per billable hour | Burden over base wage |
|---|---|---|
| 6 of 8 | $28.62 | 78.9% |
| 6.5 of 8 | $26.42 | 65.1% |
| 7 of 8 | $24.53 | 53.3% |
| 8 of 8 | $21.46 | 34.1% |
What else matters here
A $16 wage is $21.46 a paid hour with burden on it and $26.42 a billable hour, 65.1 percent over the wage.
Overtime is where this number gets away from people. Time and a half on $16 is $24, and every percentage item on this page rides along with it: FICA, workers comp, unemployment and liability are all percentages of gross pay, so they go up by half as well. Only the flat benefit dollars stay still.
Run $24 through this same calculator and the billable cost of an overtime hour is $38.40 against $26.42 for a straight one, which is 45 percent more for the same work. It is still often the right call, because the alternative is a missed date or another body on the payroll, but it has to be a decision rather than a surprise on the payroll report.
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.
Questions people ask
What does a $16 an hour employee really cost?
$21.46 per paid hour with burden, and $26.42 per billable hour at 6.5 productive hours in an 8 hour day.
What does an overtime hour actually cost?
More than time and a half. The percentage burdens ride on the higher gross, so an overtime hour at a $16 base costs $38.40 billable against $26.42 for a straight hour, 45 percent more.
What counts as a productive hour?
Only the hours you can put on an invoice. Drive time, loading the truck, fuel stops, dump runs and cleanup are all paid and none of them are billable. Six and a half out of eight is a realistic default and plenty of crews are below it.
The labor burden calculator takes any dimensions you like and hands back the same list.