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Labor burden calculator

What does an hour of your crew's time actually cost you?

The wage on the check is the smallest part of it. Payroll taxes, workers' compensation, insurance, benefits, the truck, and every paid hour that never lands on an invoice all belong to that hour too. Put one person's real numbers in and this works out the burdened cost of an hour of their time, plus a burden percentage you can carry straight into the job margin calculator. Every figure below is arithmetic on the figures you type.

The person and their hours

Do one person at a time. If you run several people at different wages, run it once per person, or once for a representative person in each pay band.

What lands on their check, per hour, before anything else. Your own figure. For yourself, use whatever hourly rate you pay yourself, or leave this to a salaried person and use the yearly figure divided by paid hours.
Every hour you pay this person for in a year, including holiday, vacation, training, and shop time. Count your own schedule; we do not assume one for you.
Out of the hours above: holiday, vacation, sick days, training, safety meetings, shop and yard time, warehouse runs, and travel you pay for but do not charge to a job. This is the hidden half of labor cost.
Costs that scale with the wage

Enter these as a percent of base wages, using your own rates. We do not supply them and we will not guess: payroll tax rates depend on your state, your wage base, and the year, and a workers' compensation rate depends on your state, your class code, and your experience modifier. Your payroll provider or bookkeeper can give you both in a few minutes, and your insurance agent can give you the comp rate.

The employer side only — not what comes out of the employee's check. Your payroll provider prints this.
Your own rate for this person's class of work. If your state or carrier charges per hour rather than per dollar, put the annual dollar amount in "other labor overhead" below instead and leave this blank.
Only the part of your general liability or umbrella premium that is rated on payroll. If yours is a flat premium, leave this blank and treat it as company overhead instead.
Union or association assessments, a payroll-based fee, anything else charged as a percent of what you pay.
Costs that are a flat amount a year

Annual dollars for this one person. Leave anything that does not apply blank — a blank counts as zero, which makes the burden look smaller than it is.

Your share of health, dental, vision, life, or disability cover for this person, per year.
Your employer contribution or match for this person, per year.
Payment or lease, insurance, plates, fuel, and maintenance for the truck they take out, per year. Only if you are not already carrying it as company overhead somewhere else.
Tool allowance, replacement of tools they break or lose, phone line, uniforms and boots, licences and continuing education you pay for, per year.
Anything else this person costs you annually that is not their wage: a per-hour comp charge converted to an annual figure, background checks, drug testing, a per-head software seat.
Optional. Your current billed labor rate for this person's work. Adds a straight comparison against the burdened cost.

Why there is no default payroll tax rate or workers' comp rate on this page

Every rate field here ships empty, and that is deliberate. Employer payroll tax rates depend on your state, your unemployment experience, the wage base, and the year. A workers' compensation rate depends on your state, the class code the work falls under, and your own experience modifier. None of those is a number we have verified, and a burden calculation built on somebody else's rate is worse than no calculation at all, because it looks authoritative. Your payroll provider, bookkeeper, and insurance agent hold the real figures.

What these terms mean

Definitions only. Every one of these is a concept, not a number — the figures are yours to supply.

Labor burden

Base wage is what lands on the check. Labor burden is everything else an hour of that person's time costs you: employer payroll taxes, workers' compensation, insurance rated on payroll, health and retirement benefits, the truck, the phone, the tools, the training, and the paid hours that never reach an invoice.

Expressed as a percent, burden is that extra annual cost divided by annual base wages. Expressed as a multiplier, it is one plus that percent as a decimal — multiply the wage by it and you have the burdened hourly cost.

Paid hours versus billable hours, and why the gap costs you twice

You pay for every hour. You bill for fewer. Holiday, vacation, sick days, training, safety meetings, the morning in the shop, the run to the supply house, and the drive time you do not charge are all paid and none of them appear on an invoice.

That gap does not reduce what the person costs you — it concentrates it. The same annual cost has to be recovered across fewer billable hours, which is why the burdened cost per billable hour on this page is higher than the burdened cost per paid hour. The billable figure is the one your pricing has to clear.

This is also the input most contractors leave blank and most regret leaving blank. If you are not sure, look at what you actually paid last year against what you actually billed in labor hours.

Burden percentage versus burden multiplier

They are the same information in two shapes. If burden works out to be some percent of wages, the multiplier is one plus that percent expressed as a decimal. A percent is what most job-costing tools ask for, including our own margin calculator. A multiplier is what most people find quicker in their head when quoting.

Both are stated in the result above, along with the plain dollar cost per hour, so you can use whichever fits the way you already work.

What this does not include

This is labor cost, not price. It contains no profit, no company overhead beyond what you attributed to this person, and no allowance for the risk of the work. Pricing an hour at its burdened cost means charging exactly what it costs you and keeping nothing.

It is also not a tax or insurance calculation. It tells you what the figures you entered add up to; it does not tell you what you owe, what you are required to carry, or whether a rate you entered is the right one. Your payroll provider, bookkeeper, CPA, and insurance agent hold those answers.

And it describes one person at one moment. Wages move, insurance renews, benefits change, and the billable share of a year is different in a busy year than a slow one.

How to use the result in the margin calculator

The job margin calculator asks for labor hours, an hourly wage, and a labor burden percentage. Enter the same base wage you used here and the burden percentage this page produced, and the job's labor line will carry its real cost instead of just the wage.

One honest caveat: that field applies burden to the hours you enter for the job, so it captures the cost side of burden but not the unbillable-hours effect, which only shows up across a whole year. If you want the harder version, use the burdened cost per billable hour from this page as your hourly figure over there and leave the burden field at zero. Either way is defensible as long as you do it the same way every time.

Educational self-help information, not accounting, tax, payroll, insurance, or legal advice, and not reviewed by an accountant. This page performs arithmetic on the figures you enter and stores nothing; it does not see your payroll, your policies, or your tax position, and it makes no statement about what your business is required to pay, carry, or withhold. Payroll tax and workers' compensation obligations vary by state and by employer. Talk to your own payroll provider, bookkeeper, CPA, or insurance agent before pricing, hiring, or filing anything on the strength of it.