A fully burdened labor rate is what an employee actually costs you per productive hour worked, not just their wage. It stacks payroll taxes, workers’ comp, benefits, and often a slice of overhead on top of the base pay, then divides by the hours they’re really on the job. For most trades that number lands 40% to 70% higher than the wage on the paycheck, which is exactly why bidding off the raw hourly rate quietly bleeds margin.
Ask a contractor what a framer costs and you’ll usually hear “twenty-eight an hour.” That’s the wage. It is not the cost. The moment you put someone on payroll, you’re also paying the government’s cut, the insurance company’s cut, and whatever benefits you promised to keep good people from leaving. Miss that gap on a bid and you can win the job and still lose money on it.
What goes into a fully burdened labor rate?
The burden is every dollar tied to employing that person beyond their gross wage. Some of it is legally required; some of it is what you chose to offer. It breaks down like this:
| Burden component | What it covers | Typical size |
|---|---|---|
| Payroll taxes | Employer Social Security (6.2%), Medicare (1.45%), federal and state unemployment | ~8-12% of wages |
| Workers’ comp | Priced per $100 of payroll, set by trade class code and your claims history | 2-4% (low-risk) to 15%+ (roofing) |
| Benefits | Health insurance, retirement match, bonuses | Varies widely; often $6k-$12k/yr |
| Other employment costs | PPE, small tools, phone, uniforms, training, vehicle/fuel allowance | $1-$3/hr |
| Overhead (optional) | A share of office, insurance, admin — sometimes folded in, sometimes marked up separately | Your call |
Whether you push general overhead into the labor rate or add it as a separate markup is a style choice. Just pick one and be consistent, because double-counting it is how you end up too high to win work you should be winning.
Why does bidding off the base wage quietly lose you money?
Because the wage is maybe 60 cents of every dollar that person costs you. The other 40 cents is real money leaving your account every pay period, whether you accounted for it in the bid or not.
Say you bid a job that needs 200 labor hours. You price the labor at $28/hour plus a 20% markup, feeling good about the profit. But your framer actually costs closer to $47 all-in. Your “profit markup” didn’t cover profit at all — it barely dented the burden you forgot to include. The job books at a loss and you won’t see it until the year-end numbers come in, by which point you’ve repeated the mistake across a dozen more bids.
The nastier version: the raw-wage bid often wins, because it’s cheaper than the competitor who did the math. You end up busiest on your least profitable work.
Watch out: The single most common burden mistake isn’t forgetting a cost — it’s dividing by the wrong hours. Employees get paid for 2,080 hours a year but they don’t produce 2,080 billable hours. Holidays, PTO, sick days, drive time, and shop time all come out. Spread the cost over paid hours and you’ll understate the true rate by several dollars.
How do you actually calculate it?
Add up the total annual cost of employing the person, then divide by their productive hours. Here’s the full walk-through for a $28/hour field employee:
- Start with annual wages. $28 × 2,080 = $58,240.
- Add payroll taxes (~10%): $5,824.
- Add workers’ comp. At $8 per $100 of payroll (8%): $4,659.
- Add benefits. Health contribution plus a small retirement match: about $8,000.
- Add other costs — phone, PPE, small tools, training, fuel: roughly $3,000.
- Total annual cost: $58,240 + $5,824 + $4,659 + $8,000 + $3,000 = $79,723.
- Find productive hours. Start at 2,080, subtract 80 PTO + 64 holiday + 40 sick + ~200 non-billable (drive time, shop, training) ≈ 1,700 hours.
- Divide. $79,723 ÷ 1,700 = $46.90/hour.
So your $28 employee carries a fully burdened labor rate of roughly $47 — a burden multiplier of about 1.68. Divide that same cost over all 2,080 paid hours instead and you’d get $38.33, understating the real number by more than eight dollars an hour. Multiply that gap across a crew and a full year and it’s serious money.
If you’d rather not rebuild this in a spreadsheet every time your comp rate or benefits change, run your own figures through the Crew Labor Burden Rate Calculator — it handles the productive-hours math so you don’t accidentally divide by the wrong denominator.
What’s a normal burden multiplier?
Most contractors land somewhere between 1.25x and 1.75x the base wage. Where you fall depends mostly on two things: how dangerous your trade is (workers’ comp) and how generous your benefits are.
- Lower end (~1.25-1.4x): low-risk trades, lean benefits, high billable utilization.
- Middle (~1.4-1.6x): most general and specialty contractors with standard benefits.
- Higher end (1.6x+): high-hazard trades like roofing, rich benefit packages, or lots of unbillable time.
Treat the multiplier as a sanity check, not a rule. Come up with a rate under 1.25x and you’ve probably left something out — usually workers’ comp or non-billable hours.
How do you put the burden rate into a bid?
Estimate the labor hours a job needs, price them at the fully burdened rate, then layer overhead and profit on top of that number — never on top of the raw wage. Using the example above, a 200-hour job costs $9,380 in labor before you’ve added a dollar of overhead or profit. That $9,380 is your floor. Everything you charge above it, minus materials and other job costs, is what’s left to run the business and pay yourself.
Two habits keep this honest. First, recalculate your burden rate at least once a year, and immediately whenever your workers’ comp rate resets or you change benefits — those two move the number the most. Second, run each employee separately if their pay, comp class, or benefits differ; a blended shop-wide rate hides the fact that your roofer and your finish carpenter don’t cost the same. The labor burden rate calculator makes it quick to re-run those numbers per person whenever something changes.
Frequently asked questions
Is labor burden the same as overhead?
No. Labor burden is the extra cost of employing a specific person — taxes, comp, benefits tied to their wages. Overhead is the cost of running the business overall, like your office, software, and general liability insurance. Some contractors fold a share of overhead into the burden rate, but they’re distinct buckets and you shouldn’t count either one twice.
Does a fully burdened rate include profit?
No. The burdened rate is pure cost — what the employee costs you to have on the job. Profit is a separate markup you add on top when you build the bid. Blending profit into the labor rate makes it hard to see whether a job actually made money.
Why not just divide by 2,080 hours?
Because employees don’t produce all 2,080 paid hours. Holidays, vacation, sick time, drive time, and shop time aren’t billable, but you still pay for them. Dividing total cost by paid hours instead of productive hours understates the true rate — often by several dollars an hour.
How often should I recalculate it?
At minimum once a year, plus any time a major input changes: a new workers’ comp rate, a raise, a new health plan, or a shift in how much billable time your crew actually logs. Bidding off a stale rate is one of the easiest ways to slowly erode margin.
What’s a good burden multiplier to aim for?
There’s no target to hit — it’s an output, not a goal. Most trades land between 1.25x and 1.75x the base wage. If yours comes out below 1.25x, double-check that you included workers’ comp and reduced your hours for non-billable time.
Should each employee have their own burden rate?
Ideally, yes. Pay, workers’ comp class codes, and benefits can vary a lot between a laborer and a lead. A single blended rate is fine for rough estimating, but for tight bids you’ll price more accurately by running each person, or at least each role, on their own.
Know your real labor cost before your next bid.
Accurate burden math starts with clean payroll and expense books. Tabby handles the bookkeeping for contractors and 1099 pros automatically, so the numbers you plug into a bid are the real ones. Start a free trial and stop guessing at what your crew actually costs.
