Labor Burden Calculator

Why labor burden is the #1 thing contractors price wrong

Ask a contractor what their lead carpenter costs and most will answer with the wage — “I pay him $28 an hour.” That's the pay stub number. The actual cost to employ that person, once you add payroll taxes, insurance, benefits, and unproductive paid time, is closer to $38-$42 per billable hour. The gap between those two numbers is where margin quietly dies.

This calculator walks you through the full burden stack and shows you three numbers that matter: the raw wage, the true hourly cost (wage + all fringes), and the effective billable cost (the number you should actually use when pricing jobs).

The burden components

Burden is everything on top of wages that's tied to employing a human being:

• FICA (7.65%) — Social Security + Medicare, the employer's matching share. Fixed rate.
• FUTA + SUTA (~2%) — Federal and state unemployment insurance. SUTA varies by state and by your claims history, but 2% blended is a reasonable default.
• Workers' comp (3-25%) — Biggest variable. Check your dec page. Roofing is punishing; finish carpentry is gentle. Your experience modifier (ex-mod) either helps or hurts.
• General liability (1-3%) — Usually priced as a percentage of payroll. Varies by trade and claim history.
• Health insurance ($400-$1,200/mo per employee) — A flat monthly cost if you offer it. Converts to an hourly figure by spreading across annual hours.
• Retirement match (0-6%) — If you offer a 401(k) or SIMPLE IRA with a match, that match is burden.
• PTO + holidays — You pay the wage but collect zero revenue. Usually 15-20 paid non-working days per year.
• Non-billable time — Shop cleanup, tool maintenance, travel beyond the first leg, rework on your dime, crew meetings. Figure 8-15% of paid hours for most field crews.

How to use the three result numbers

True hourly cost is useful for answering “how much does this person cost me, per paid hour, all-in?” Use it for P&L analysis, year-end profit reviews, and comparing crew cost to industry benchmarks.

Effective billable cost is what you price jobs off. It divides the total annual cost by only the hours that produce revenue — stripping out PTO, holidays, and known non-billable time. This is the number you plug into your estimating spreadsheet when you bid work.

Burden multiplier is the quick-reference number for estimators. If your burden multiplier is 1.42, you multiply any wage by 1.42 to get the true hourly cost. Most contractors memorize their trade-specific multiplier and use it as a gut-check when reviewing estimates.

A worked example

Take a $28/hr lead carpenter at 2,080 annual hours. Gross pay is $58,240. Add 7.65% FICA ($4,455), 2% FUTA/SUTA ($1,165), 8% workers' comp ($4,659), 2% general liability ($1,165), $600/mo health ($7,200), and 3% retirement match ($1,747). Fringes total $20,391 — which is $9.80 per paid hour. True hourly cost: $37.80.

But subtract 80 hours of PTO, 56 hours of holidays, and 10% non-billable time (208 hours). That leaves 1,736 billable hours. Divide total cost ($78,631) by 1,736 and effective billable cost is $45.30/hr — a 1.62× multiplier on the wage. Most contractors who bid at 1.30× are losing $17 an hour they don't know they're losing.

How to reduce your burden

Not all burden is fixed. Workers' comp is the biggest controllable lever — a safety program that drops your ex-mod from 1.20 to 0.90 cuts 25% off your WC premium. GL rates move with your loss history. Health insurance is controllable via plan design (HDHP with HSA, spousal carve-outs). And non-billable time is the single fastest fix most contractors ignore — a 15% non-billable shop can usually get to 10% just by tracking it.

The move isn't to slash burden for its own sake; it's to know it accurately so you price above it.