Labor Rate Calculator
Calculate the true cost of labor per hour including wages, taxes, insurance, and benefits.
Formula
Fully Burdened Labor Rate = Base Hourly Wage + Payroll Taxes (employer share) + Workers Comp Insurance + Health Insurance + Benefits + Overhead Allocation per Hour
How to Use
- 1Start with the employee's base hourly wage (what they see on their paycheck).
- 2Add employer payroll taxes: Social Security (6.2%), Medicare (1.45%), FUTA, and SUTA — typically 10-12% of wages.
- 3Add workers compensation insurance cost per hour (varies by trade classification and experience modifier).
- 4Add health insurance, retirement contributions, and other benefits prorated to an hourly rate.
- 5Divide your annual overhead by total billable hours across all employees to get overhead allocation per hour.
Example
Scenario
A carpenter earns $30/hour. You need to calculate the fully burdened rate including all employer costs.
Calculation
Base wage: $30.00. Payroll taxes (11%): $3.30. Workers comp (8%): $2.40. Health insurance ($500/month ÷ 173 hours): $2.89. Paid time off (10 days/year): $1.38. Overhead allocation: $8.00/hour. Total: $30.00 + $3.30 + $2.40 + $2.89 + $1.38 + $8.00 = $47.97.
Result
The fully burdened labor rate is $47.97 per hour — 60% higher than the $30 base wage. This is the true cost you must recover in your estimates.
Tips
- ★Your burdened labor rate is typically 1.4x to 1.7x the base wage — never estimate using just the base hourly rate.
- ★Update your labor rate calculation at least annually when insurance renewals, tax rates, and benefit costs change.
- ★Track non-billable hours (training, meetings, travel) and factor them into your effective billable rate.
- ★Different trade classifications carry different workers comp rates — calculate separate burdened rates for each trade on your team.
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Common questions about the labor rate calculator
The burdened rate includes all employer costs beyond the wage: payroll taxes (Social Security, Medicare, unemployment), workers compensation insurance, health insurance, retirement contributions, paid time off, and a share of company overhead. These costs typically add 40-70% on top of the base wage.
Employees are paid for breaks, cleanup, travel between jobs, meetings, and training — time that is not directly billable. If an employee works 2,080 hours per year but only 1,600 are productive and billable, divide your total annual labor cost by 1,600 (not 2,080) to get the effective billable rate.
Yes, calculate separate burdened rates for different pay levels and trade classifications since workers comp rates and benefit costs vary. However, many contractors use a blended crew rate (average of all field employees) for estimating to simplify the bidding process.