Labor Burden Chart: What an Hour of Labor Actually Costs
Fourteen base wages against six workers compensation rates, showing what the hour actually costs you before a minute of it is unbillable, and then what happens when some of it is.
The wage on the check is not the cost of the hour. On top of it sit FICA at 7.65 percent, state and federal unemployment, workers compensation at a rate set by the trade, general liability priced off payroll, and whatever benefits the business carries. Together they are the labor burden.
The second thing that moves the number is that not every paid hour is a billable one. Drive time, loading, the supply house, the rained out morning and the cleanup are all paid and none of them appear on an invoice, so the burdened cost has to be recovered across fewer hours than were paid for.
Burdened cost per paid hour, by wage and workers comp rate
| Base wage | 2% comp | 5% comp | 9% comp | 15% comp | 25% comp | 40% comp |
|---|---|---|---|---|---|---|
| $16.00 | $20.34 | $20.82 | $21.46 | $22.42 | $24.02 | $26.42 |
| $18.00 | $22.64 | $23.18 | $23.90 | $24.98 | $26.78 | $29.48 |
| $20.00 | $24.93 | $25.53 | $26.33 | $27.53 | $29.53 | $32.53 |
| $22.00 | $27.22 | $27.88 | $28.76 | $30.08 | $32.28 | $35.58 |
| $25.00 | $30.66 | $31.41 | $32.41 | $33.91 | $36.41 | $40.16 |
| $28.00 | $34.10 | $34.94 | $36.06 | $37.74 | $40.54 | $44.74 |
| $30.00 | $36.39 | $37.30 | $38.49 | $40.30 | $43.30 | $47.80 |
| $32.00 | $38.69 | $39.65 | $40.93 | $42.85 | $46.05 | $50.85 |
| $35.00 | $42.13 | $43.18 | $44.58 | $46.68 | $50.18 | $55.43 |
| $40.00 | $47.86 | $49.06 | $50.66 | $53.06 | $57.06 | $63.06 |
| $45.00 | $53.59 | $54.94 | $56.74 | $59.44 | $63.94 | $70.69 |
| $50.00 | $59.33 | $60.83 | $62.83 | $65.83 | $70.83 | $78.33 |
| $60.00 | $70.79 | $72.59 | $74.99 | $78.59 | $84.59 | $93.59 |
| $75.00 | $87.99 | $90.24 | $93.24 | $97.74 | $105.24 | $116.49 |
Burden as a percent over the wage
| Base wage | 2% comp | 5% comp | 9% comp | 15% comp | 25% comp | 40% comp |
|---|---|---|---|---|---|---|
| $16.00 | 27.2% | 30.1% | 34.1% | 40.2% | 50.2% | 65.1% |
| $18.00 | 25.8% | 28.8% | 32.8% | 38.8% | 48.8% | 63.8% |
| $20.00 | 24.6% | 27.7% | 31.7% | 37.7% | 47.7% | 62.7% |
| $22.00 | 23.7% | 26.7% | 30.7% | 36.7% | 46.7% | 61.7% |
| $25.00 | 22.7% | 25.6% | 29.7% | 35.7% | 45.7% | 60.7% |
| $28.00 | 21.8% | 24.8% | 28.8% | 34.8% | 44.8% | 59.8% |
| $30.00 | 21.3% | 24.3% | 28.3% | 34.3% | 44.3% | 59.3% |
| $32.00 | 20.9% | 23.9% | 27.9% | 33.9% | 43.9% | 58.9% |
| $35.00 | 20.4% | 23.4% | 27.4% | 33.4% | 43.4% | 58.4% |
| $40.00 | 19.6% | 22.7% | 26.6% | 32.7% | 42.7% | 57.7% |
| $45.00 | 19.1% | 22.1% | 26.1% | 32.1% | 42.1% | 57.1% |
| $50.00 | 18.7% | 21.7% | 25.6% | 31.7% | 41.7% | 56.7% |
| $60.00 | 18% | 21% | 25% | 31% | 41% | 56% |
| $75.00 | 17.3% | 20.3% | 24.3% | 30.3% | 40.3% | 55.3% |
What unbillable time does to the rate
| Base wage | 5 of 8 billable | 5.5 of 8 billable | 6 of 8 billable | 6.5 of 8 billable | 7 of 8 billable | 8 of 8 billable |
|---|---|---|---|---|---|---|
| $16.00 | $34.34 | $31.22 | $28.62 | $26.42 | $24.53 | $21.46 |
| $18.00 | $38.24 | $34.76 | $31.86 | $29.41 | $27.31 | $23.90 |
| $20.00 | $42.13 | $38.30 | $35.11 | $32.41 | $30.09 | $26.33 |
| $22.00 | $46.02 | $41.84 | $38.35 | $35.40 | $32.87 | $28.76 |
| $25.00 | $51.86 | $47.15 | $43.22 | $39.89 | $37.04 | $32.41 |
| $28.00 | $57.70 | $52.45 | $48.08 | $44.38 | $41.21 | $36.06 |
| $30.00 | $61.59 | $55.99 | $51.33 | $47.38 | $43.99 | $38.49 |
| $32.00 | $65.48 | $59.53 | $54.57 | $50.37 | $46.77 | $40.93 |
| $35.00 | $71.32 | $64.84 | $59.44 | $54.86 | $50.95 | $44.58 |
| $40.00 | $81.06 | $73.69 | $67.55 | $62.35 | $57.90 | $50.66 |
| $45.00 | $90.79 | $82.53 | $75.66 | $69.84 | $64.85 | $56.74 |
| $50.00 | $100.52 | $91.38 | $83.77 | $77.32 | $71.80 | $62.83 |
| $60.00 | $119.98 | $109.08 | $99.99 | $92.30 | $85.70 | $74.99 |
| $75.00 | $149.18 | $135.62 | $124.32 | $114.75 | $106.56 | $93.24 |
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The labor burden calculator takes your own measurements and returns the number for your job, plus the material list as a printable document. Every cell in the table above came out of that same calculator, run at build time.
The pieces, and which of them are negotiable
FICA is 7.65 percent of wages and is not negotiable. Federal unemployment is small and capped early in the year, state unemployment is experience rated and gets worse if you lay people off, and together they are usually two to four percent on a construction payroll.
Workers compensation is the one that moves. It is priced per hundred dollars of payroll against a class code, it varies enormously by trade and by state, and it varies by employer inside that. A clean experience modifier is worth real money, and a bad one is a tax on every hour for three years.
Liability priced off payroll behaves like a tax
Most general liability policies for trade contractors are rated on payroll or on receipts, which means the premium moves with the work rather than sitting still. Treating it as a fixed overhead line understates the cost of a busy year.
The percentage to use is your own premium divided by your own payroll, not a number from a forum. If the policy is rated on receipts instead, convert it to a payroll percentage once a year and use that.
Billable hours are the number nobody tracks
Six and a half billable hours out of an eight hour day is a normal figure for a service trade with drive time between calls. New construction crews on a single site run higher, and a one truck operation running its own estimates and its own supply runs often runs a good deal lower.
This is worth measuring rather than assuming, because the difference between 6.5 and 7.5 hours is about fifteen percent on the charge out rate, which is larger than most people's entire profit margin.
Burden is a cost, not a markup
The burdened figure belongs in the cost side of the estimate. Overhead and profit go on top of it, and a business that treats the burden as if it were the markup is pricing the job at cost and calling it a margin.
The overhead and profit chart runs the next step, and the hourly rate chart works the whole thing backwards from what you want to earn in a year.
Questions people ask
What is labor burden?
Everything you pay for an hour of work beyond the wage itself: payroll taxes, unemployment, workers compensation, general liability rated on payroll, and benefits. Expressed as a percentage on top of the base wage.
What is a typical labor burden percentage?
Twenty five to fifty percent over the base wage is the usual band for a trade contractor, driven mostly by the workers comp rate. High hazard trades like roofing can run well past that.
How do I calculate the true cost of an employee per hour?
Add FICA, unemployment, workers comp, payroll rated liability and benefits to the wage to get the burdened cost of a paid hour. Then divide by the fraction of paid hours that are actually billable.
Does labor burden include overhead?
No. Burden is the cost of employing the person. Overhead is the cost of running the business, and it is recovered separately as a percentage of the whole job, which is what the overhead and profit chart does.
Why does workers comp vary so much?
It is priced per class code, per state, per employer. A carpenter, a roofer and a bookkeeper in the same company are three different rates, and the company's own claims history multiplies all of them.