Free Labor Burden Calculator & Guide

labor burden calculator

Labor Burden Calculator

Free labor burden calculator that calculates your total employee hourly cost

Step 1: Enter the hourly labor rate into the pay rate field at the top of the calculator.

Step 2: Next, find your General Liability policy and type in the rate per $1000 value. Type in the Workers Compensation rate for the employee. Fill out the health insurance and any other benefits you may be providing. Use the Other row to specify any other benefits we may not have listed explicitly.

Step 3: Review the fully burdened labor rate and the labor burden component generated by the calculator. The fully burdened labor rate is the workers pay rate with all the added overhead costs included which effectively gives you your fully loaded employee cost. The labor burden component are just the overhead costs on a per hour basis.

1. SUTA rates vary depending on your unemployment claims in different states. 3.0% is an estimate.

2. SUTA rates vary depending on your unemployment claims in different states. 3.0% is an estimate.

3. An average work week of 40 hours has been assumed for these calculations

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What Is Labor Burden?

An employee’s pay rate and their true cost to your business are not the same thing. Calculating labor burden is involves adding all of the additional overheads involved in employing someone to their pay rate to work out their true cost. Many businesses lose money because they don’t correctly calculate their real labor cost for employing each of their workers. Understanding your labor cost is critically important if you are running a construction business because a large percentage of your projects costs come from labor. If you don't do this correctly you risk inaccurately bidding jobs that could go way over budget, and ultimately lose you money.

To make sure your construction company is profitable, you’ll need to apply strict controls over labor costs. But reconciling labor costs can be complicated. Factors like health care, benefits, training, and increased administrative overhead have made labor more expensive—and you’ll need to account for these additional expenses in your labor cost calculations.

To identify your true labor costs, we've provided a free labor burden calculator that helps you calculate your labor burden for each employee.

What Employee Costs Should Be In A Fully Burdened Labor Rate?

Labor burden needs to include to the indirect costs of your labor—in other words, the cost of having that labor. Indirect labor cost typically includes:

  • Payroll taxes including FICAFUTA & SUTA.
  • Workers compensation insurance.
  • Health insurance and other benefits.
  • Retirement benefits
  • Paid Leave
  • Additional training or classes.
  • Safety gear, employee equipment, or employee supplies.
  • Annual overhead costs like time spent in meetings, or time commuting.

It’s a common mistake to bid a job based solely on direct labor costs (the hourly wage). While the direct labor costs could be $20 an hour, the indirect labor costs could be closer to $30 or even $40 an hour.

On average, an employee’s labor burden is 24%—or $0.24 on the dollar.

For a more detailed explanation of what to include and how to calculate labor burden, check out our guide on how to calculate labor burden.

What are Payroll Taxes?

As an employer, you’re required to pay taxes for the Federal Insurance Contributions Act (FICA), which covers Social Security and Medicare, and the Federal Unemployment Tax Act (FUTA), which funds labor related agencies. In addition, you are required to pay state level unemployment taxes (SUTA).

Navigating these payroll taxes can feel very complicated and if you get it wrong, you can easily end up in trouble with the IRS. Luckily most modern payroll systems today automatically calculate payroll taxes for you and also take care of filing and paying these taxes to the government.

When in doubt it’s always a best practice to check with your accountant to ensures you taxes are being calculated and remitted correctly.

Typical Labor Burden Rates In Construction

There is no typical labor burden rate for construction, it really depends on the type of projects and trades you are hiring, although rates tend tend to be higher due to workers compensation insurance rates being higher than other industries. The biggest factors tend to be your workers compensation insurance rates and whether you are a union contractor versus working on private projects.

Employers can pay 30, 40 and even 50% of an employee’s hourly wage in indirect costs. It is interesting to note that for a union contractor, the labor burden rate for employee costs ranges from 60 to 70%. There are typical contractor overhead and profit margins you be aware of that you can use as a benchmark for your specific business.

Improve Your Estimating By Calculating Labor Burden Accurately

Using your labor burden rate when estimating projects will help correctly identify exactly how much a project will actually cost. Imagine you are estimating a project for 10 workers and don’t account for indirect costs, that will sum up to a significant amount of money. Figuring the labor burden is crucial to achieving the margins you are aiming for in your estimates.

Once you are confident that your estimates reflect your true costs, the next step to make sure you accurately track your actuals. Tracking and comparing your actuals to your estimates is the best way to ensure you hit your goals and also learn from your mistakes and improve future bids.

It's not easy to accurately track time spent on each project across your whole crew, thats where a construction time card app can help you. Workyard is specifically designed to help contractors to manage and measure their crew’s work through one app they can learn to use in minutes.

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