What labor burden includes
Labor burden is every cost of employing someone beyond their hourly wage. In construction it falls into four groups:
- Payroll taxes the employer pays. Social Security (6.2%) and Medicare (1.45%) under FICA, federal unemployment (FUTA) and state unemployment (SUTA).
- Insurance tied to payroll. Workers’ compensation, usually quoted per $100 of payroll by class code, and the part of general liability premium that is rated on payroll.
- Benefits. Health insurance, retirement contributions, union fringes, tool or vehicle allowances.
- Paid time that produces nothing. Vacation, holidays, and the hours on the clock spent driving between sites, waiting on materials, in safety meetings or sitting out weather.
The first three are what most people mean by “burden”. The fourth is where most contractors lose money, because it doesn’t show up as a line on any invoice.
How the calculator works
The calculator builds up one worker’s full cost for a year, then divides it by the hours that actually produce work.
- Annual wages are the base wage times paid hours per year.
- Social Security is 6.2% of wages up to the 2026 wage base of $184,500. Medicare is 1.45% with no cap.
- FUTA is 0.6% of the first $7,000 per worker, which is the 6.0% federal rate after the full 5.4% credit for paying state unemployment on time. If your state is a credit-reduction state, add that percentage in the FUTA field.
- SUTA is your state rate times the lesser of wages and your state’s taxable wage base.
- Workers’ comp is the rate per $100 times wages divided by 100. General liability is a percent of wages.
- Health insurance is the monthly employer cost times 12. Retirement is the match percentage times wages. Other fringes are an hourly amount times paid hours.
- Productive hours start from paid hours, take out PTO and holidays at 8 hours a day, then take out the unproductive share of the hours that remain.
- Cost per productive hour is total annual cost divided by productive hours.
- Billable rate is that cost divided by one minus your target margin. A 15% margin means dividing by 0.85, which is a 17.6% markup.
The crew rate multiplies the billable rate by crew size, and the daily rate assumes an 8-hour day.
A worked example
Take a drywall finisher at $32.00 an hour, working 2,080 paid hours with 10 PTO days and 6 holidays. Assume 10% of on-site time is unproductive, a 2.7% SUTA rate on a $9,000 wage base, workers’ comp at $5.50 per $100, general liability at 1.8%, $650 a month for health insurance and a 3% retirement match.
| Cost item | Per year |
|---|---|
| Base wages (2,080 × $32) | $66,560.00 |
| Social Security (6.2%) | $4,126.72 |
| Medicare (1.45%) | $965.12 |
| FUTA (0.6% of $7,000) | $42.00 |
| SUTA (2.7% of $9,000) | $243.00 |
| Workers’ comp ($5.50 per $100) | $3,660.80 |
| General liability (1.8%) | $1,198.08 |
| Health insurance ($650 × 12) | $7,800.00 |
| Retirement match (3%) | $1,996.80 |
| Total cost per worker | $86,592.52 |
Burden is $20,032.52, or 30.1% of base wages. Divided across all 2,080 paid hours, that’s $41.63 an hour, and that’s the number many contractors stop at.
Now the productive hours. Sixteen days of PTO and holidays remove 128 hours, leaving 1,952 hours on site. Ten percent of those are unproductive, which leaves 1,756.8 productive hours. The true cost is $86,592.52 ÷ 1,756.8 = $49.29 per productive hour, about $7.66 more than the paid-hour figure.
At a 15% margin the billable rate is $49.29 ÷ 0.85 = $57.99 an hour, and a crew of four bills at $231.95 an hour.
An estimate built on $41.63 an hour looks 15% cheaper than one built on $49.29, and that gap comes straight out of profit on every hour of labor.
Getting accurate inputs
- Use your policy numbers, not averages. The trade presets are illustrative. Workers’ comp varies widely by state, class code and experience mod, so a framing contractor in one state can pay three times what the same contractor pays in another.
- Measure unproductive time instead of guessing. Compare hours paid with hours charged to cost codes on a few recent jobs. Ten to fifteen percent is common for crews that move between sites.
- Run it per classification. A foreman, a journeyman and an apprentice have different wages and often different comp classes. Run each and use a blended crew rate in your estimate.
- Revisit it every January. The Social Security wage base, state SUTA rates and insurance renewals change every year.
Where this fits in an estimate
The cost per productive hour is the labor rate to put in your estimate. Your overhead and profit markup goes on top of the whole estimate, not just labor. To find that markup, use the overhead and markup planner. When a change comes up mid-job, bring this rate into the change order calculator so extra work is priced at what it really costs.