GENERAL CONTRACTOR
How to Calculate Labor Burden
Understand everything that sits on top of a wage, why base pay alone loses money, and how to turn burden into your real labor rate.
The wage you pay is not the wage you pay. Taxes, workers' compensation, insurance, paid time off and benefits all sit on top of every dollar of base pay. That extra cost — the labor burden — is the difference between a company that knows its true cost and one that discovers it at tax time. This guide breaks it down.
What labor burden actually includes
Labor burden is every employer cost above the base wage. The usual pieces are payroll taxes, workers' compensation, unemployment insurance, paid time off and benefits such as health insurance and retirement. None of these shows up on the worker's pay stub, but all of them show up on your cost.
- Social Security and Medicare taxes
- Workers' compensation insurance
- State and federal unemployment
- Paid time off and holidays
- Health benefits and retirement matches
Why base wage alone quietly loses money
If you price jobs off the base wage only, every hour shortchanges you by the burden you still have to pay. It may feel like you are making money, but you can owe more than you earned by the time taxes and insurance are settled. Pricing from the true cost is the only way to stay ahead.
Estimate your burden with the calculator
Use the labor calculator with your crew hours, wage and a burden percentage. It separates base wages from the burden cost and shows the effective cost per labor hour — the number your prices must recover.
Track your own real numbers
The burden percentage is not a guess you borrow from a website. It comes from your payroll records: total employer-paid taxes and benefits divided by total base wages over a year. Review it at renewal time and whenever your crew or benefits change.
Stay compliant as you go
Labor burden is also about classification: know the difference between employees and contractors in your state, keep workers' compensation in force and stay current on payroll filings. The dollar figures matter, but the rules protect you from much larger problems down the road.