π· Labor Cost Calculator
Wages are only the beginning.
Total annual labor cost
Estimates for planning only, not financial advice.
An employee's true cost is wages plus the burden: payroll taxes, insurance, and benefits, typically 25-40% on top. At $25.00 an hour and 40 hours, base wages are $52,000.00 a year, but a 30% burden rate makes the loaded cost $32.50 an hour, or $67,600.00 annually. Quote projects on the loaded number or the margin evaporates.
How to Use This Calculator
Enter the hourly wage, weekly hours, and your burden rate. The calculator returns the loaded hourly cost and total annual cost.
Enter the hourly wage.
Enter hours per week and the burden percent.
Read loaded cost. For staffing levels in FTE terms, our FTE calculator converts headcount.
What Is the Burden Rate
The burden stacks fast: 7.65% employer FICA, federal and state unemployment insurance, workers' comp (which varies wildly by trade), health insurance, retirement match, and PTO. A desk worker might carry 25%; a roofer can carry 60%+ with comp rates. Underestimating burden is the classic small-business pricing error: the $25/hr hire priced at $25/hr loses money on every hour.
Worked Example
$25.00/hr x 40 hrs x 52 = $52,000.00 base wages. At 30% burden: loaded hourly = $32.50, annual = $67,600.00. A contractor billing this worker at $65/hr clears $65 - $32.50 = $32.50/hr before overhead, a 50% gross margin on labor. Bill at $45/hr and the margin is $12.50, which overhead eats alive. Now the hiring decision: two $25/hr part-timers at 25 hours each cost the same loaded wages as one full-timer, but benefits eligibility can tilt the total either way.
Pricing Labor Profitably
Three rules. First, never quote below 2x loaded cost for services; 3x is healthier once overhead, downtime, and selling costs land. Second, recompute burden yearly: insurance renewals and tax changes move it silently. Third, track utilization: a $67,600 employee billing 1,000 hours a year costs $67.60 per billable hour, not $32.50. Bench time is the hidden multiplier.
My rule of thumb: if you do not know your burden rate, use 35% and refine it. Pricing on wages alone is the fastest way to grow revenue and shrink profit simultaneously. For project quotes, multiply loaded cost by hours, add materials and margin, and you have a quote that survives contact with reality.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is the true cost of an employee?
Wages plus the burden rate: payroll taxes, unemployment insurance, workers' comp, health insurance, retirement, and PTO. Typically 1.25x to 1.4x the wage, higher in hazardous trades.
What is a labor burden rate?
The percentage added to wages for employer-paid taxes, insurance, and benefits. It converts the hourly wage into the loaded hourly cost used for pricing and budgeting.
What burden rate should I use?
Start with 30-35% for office staff if you lack data; use actuals by trade otherwise. Workers' comp alone can add 5% for clerical or 40%+ for roofing. Recompute annually.
How do I price services using labor cost?
Bill at 2-3x loaded hourly cost to cover overhead, downtime, and profit. A $32.50 loaded hour needs a $65-95 billing rate depending on utilization and overhead.
Does burden apply to contractors?
No, that is the point of contractors: no payroll taxes or benefits. But misclassifying employees as contractors to dodge burden is illegal and penalized heavily.
How does utilization affect hourly cost?
Dividing annual cost by billable hours, not 2,080, gives the true per-hour cost. At 1,000 billable hours, a $67,600 employee costs $67.60 per billable hour.
What is included in workers' comp rates?
State-set premiums per $100 of payroll by risk class. They are a major burden component for trades and negligible for office work. Experience modifiers adjust for your claims history.
Should part-time workers use the same burden?
Mostly, but benefits eligibility differs: part-timers often skip health insurance, lowering their burden. Compute separately rather than assuming one rate fits all.
How do benefits change the burden rate?
Health insurance is usually the largest single component after FICA. A $6,000 annual premium on a $50,000 wage adds 12 points of burden by itself, before retirement and PTO.
What is the difference between burden and overhead?
Burden is employee-specific cost tied to payroll; overhead is business-wide cost like rent and software. Loaded labor cost includes burden; project pricing must then also cover overhead.
How often should burden rates be updated?
Yearly at minimum, and whenever insurance renews or tax rates change. A workers comp rate change or new state mandate can move burden several points without any hiring decision.
Do salaried workers have a burden rate?
Yes: convert salary to an hourly equivalent first (annual salary divided by 2,080), then apply the same burden percentage. Exempt status changes overtime rules, not the burden math.
Is burden the same for remote workers?
Largely, though workers comp class and state unemployment rates follow the work location. Multi-state remote teams need per-state burden math, which payroll providers usually automate.