Business cost profile
Labor Burden Calculator
Turn a base hourly wage into the real cost of one productive labor hour.
Employee cost assumptions
Use your own payroll and benefit figures. The defaults are illustrative.
Loaded labor result
Where the burden comes from
Every figure below applies one of your own inputs to this employee’s annual wage bill. Change a rate above and its share moves with it. Payroll taxes usually combine the employer share of Social Security and Medicare with federal and state unemployment. Enter your own combined rate rather than a rate copied from another business.
| Burden component | Annual cost | Share of base pay |
|---|---|---|
| Base wages | $62,400 | n/a |
| Payroll taxes | $5,616 | 9% |
| Workers’ compensation | $2,496 | 4% |
| Other variable burden | $1,248 | 2% |
| Benefits | $6,240 | 10% |
| Insurance | $2,080 | 3.3% |
| Total burden | $17,680 | 28.3% |
| Loaded labor cost | $80,080 | $44 per productive hour |
Your next step
Contractor Overhead Calculator
Spread annual overhead across billable hours and find the overhead recovery rate.
Continue to overhead recoveryThe method behind these numbers
How to calculate labor burden and loaded hourly cost
The hourly wage is the starting point, not the cost of an hour of work. Labor burden adds the employer costs and divides by hours that can actually be sold.
What this calculation tells you
Short answer. Labor burden is the gap between an employee's base wage and the true cost of one productive hour. It includes the employer's payroll taxes, workers' compensation, benefits, insurance and paid time off. QuoteFormula calculates loaded hourly cost as annual wages plus payroll burden and benefits, divided by productive hours. Productive hours are the hours that can actually be billed, not all 2,080 paid hours. The result is the rate to use in job costing for that role. It is not a statutory rate, a billing rate or a market wage. The tool does not calculate payroll tax or workers' compensation premiums for you, so enter your own figures. Use it before building a job cost so the estimate reflects what labor really costs the business, and update it when pay, benefits or staffing change.
How this calculator works
The formula
loaded hourly cost = (annual wages + payroll burden + benefits) ÷ productive hoursHow to use it
- Enter the employee's base hourly wage and annual paid hours.
- Add the employer's annual payroll taxes, workers' compensation, benefits and other employer costs.
- Enter only the hours that can be spent on billable work, then compare the loaded hourly cost with the base wage.
Reading the result
Use the loaded hourly cost in every job-cost line for that role. If the result is far above the wage, check the benefit, insurance and productive-hour inputs; do not lower the number simply to make a quote look competitive.
Worked example
Illustrative example: a $30 hourly wage paid for 2,080 hours is $62,400. Adding 9.5% payroll taxes ($5,928), 6% workers' compensation ($3,744) and $8,400 of benefits gives $80,472. Divided by 1,560 productive hours, the loaded cost is $51.58 per billable hour.
Limitations
- The result depends on your own payroll, insurance and benefit figures, which vary by state, policy and employee.
- Productive hours exclude paid time off, holidays, training and administration; using 2,080 paid hours understates the true hourly cost.
- The tool does not calculate statutory payroll tax rates or workers' compensation premiums for you.
Read the calculation methodology for the contracts behind every result or the full guide, How to calculate labor burden and loaded hourly cost.
Labor burden vs overhead
Labor burden belongs to a person. It is the employer cost of employing that specific worker: payroll taxes, workers' compensation, benefits, insurance and paid time off. It is recovered inside the loaded hourly cost of that worker's hour.
Overhead belongs to the business. Rent, vehicles, software, office wages, accounting and marketing cannot be traced to one worker's hour. They are recovered by spreading annual indirect costs across the billable hours the business can sell, which is the calculation the contractor overhead calculator performs.
The test that separates them: can the cost be traced to one employee's hour? If it can, it is burden. If it exists whether or not that employee works, it is overhead. A shared truck, the insurance on the shop and the bookkeeper's wage are all overhead, even when they are paid every month alongside that employee's wages.
The expensive mistake is counting the same cost twice. A business that enters vehicle costs as both burden and overhead raises its loaded hourly cost and then raises every price built from it. The opposite mistake, leaving overhead out of the price entirely, is more common and costs more: the job looks profitable on paper while the business slowly loses money.
Frequently asked questions
- Does labor burden include the base wage?
- No. The base wage is what the employee earns per hour. Labor burden is the employer cost added on top: payroll taxes, workers' compensation, benefits, insurance and paid time off. QuoteFormula adds the two to produce loaded hourly cost.
- Why divide by productive hours instead of 2,080 paid hours?
- Productive hours are what remain for billable work after vacation, holidays, training, administration and travel. Dividing the same annual cost by all 2,080 paid hours spreads it over hours that cannot be sold and understates the true cost of a billable hour.
- Is there a standard labor burden percentage?
- No universal percentage applies. Burden varies by state, policy, benefits and role. Use your own payroll and insurance figures, and recalculate when pay, coverage or staffing changes instead of copying an industry rule of thumb.