Labor Burden Rate Calculator for Contractors

Labor burden rate is the total cost of an employee beyond their base hourly wage, expressed as a percentage of wages. It includes mandatory payroll taxes (FICA 7.65%, FUTA, SUTA), workers comp insurance, health insurance (if provided), retirement contributions, and the cost of paid time off. A $28/hr carpenter with a 35% burden rate costs $28 × 1.35 = $37.80/hr in total. Most contractors run a burden of 25–50% depending on the trade and benefits offered.

Step 1: Calculate annual wages (hourly wage × annual paid hours). Step 2: Add up all annual burden costs: FICA (7.65% of wages), FUTA (0.6% on first $7k, max $42), SUTA (avg 2.7% on first $10k), workers comp (rate per $100 payroll × wages ÷ 100), health insurance, retirement match (% of wages), and PTO (days × 8 hrs × hourly wage). Step 3: Divide total burden by annual wages to get burden %. Step 4: Divide (annual wages + total burden) by productive hours (paid hours minus PTO hours) to get true cost per hour.

Workers comp insurance is the main driver. Electricians are classified under NCCI code 5190 at about $2.63 per $100 of payroll — one of the lowest rates in construction. Roofers are classified under NCCI 5552 at $20–$40 per $100 of payroll — up to 15 times higher — because roofing accounts for 26% of all construction fall fatalities according to the BLS. On a $50,000 payroll, an electrician pays ~$1,315 in workers comp; a roofer pays $10,000–$20,000. This difference alone adds 18–38 percentage points to the roofer's burden rate.

For a small contractor providing basic benefits, labor burden typically runs 28–42% of base wages. The breakdown: FICA (7.65%) + FUTA (~0%) + SUTA (~0.27%) + workers comp (2–10% depending on trade) + health insurance (if offered, adds 8–15%) + retirement (3%) + PTO (5–8%). Without health insurance — common for smaller contractors — burden runs 20–30%. Roofers and carpenters run higher due to workers comp; electricians and HVAC techs run lower.

Yes — paid time off must be in your labor cost calculation, even if it feels like it's already in the wage. Here's why: an employee earning $28/hr for 2,080 annual hours costs you $58,240 in wages. But they only deliver ~1,840 productive hours (after 15 days of PTO). If you bid jobs using $28/hr × productive hours, you're already $2,800 short (15 days × 8 hrs × $28). The true cost per productive hour is $58,240 ÷ 1,840 = $31.65 — even before adding FICA and other burden items.

Labor burden is the cost of employing a specific person — it scales directly with their wages. Overhead is the cost of running your business regardless of who you employ — vehicle, insurance, marketing, software, accounting. Both must be recovered in your billing rate, but they are calculated separately. A correct job bid includes: direct materials + (labor hours × true hourly cost including burden) + overhead allocation + profit margin. Using the bare wage for labor and ignoring burden is one of the most common bidding errors in contracting.

FICA (Federal Insurance Contributions Act) requires employers to match the employee's Social Security and Medicare taxes. Employees pay 7.65% of their wages in FICA; employers also pay 7.65%. So FICA adds 7.65% to your wage cost immediately, regardless of any other benefits. On a $30/hr employee working 2,080 hours ($62,400/yr), employer FICA is $4,773/year. Social Security applies to the first $168,600 of wages (2024 threshold); Medicare applies to all wages with no cap.

SUTA (State Unemployment Tax Act) is the state-level unemployment insurance tax. Each state sets its own wage base (the maximum wages subject to the tax) and its own rate. The federal minimum wage base is $7,000, but most states have higher bases: Florida $7,000, Texas $9,000, California $7,000, New York $12,500, Washington $68,500. Rates also vary by employer claim history — companies with few unemployment claims pay lower rates (as low as 0.1%), while companies with many claims pay higher rates (up to 10%+). The national average rate is about 2.7%.