What labor burden includes
Burden is the sum of the mandatory and voluntary costs of employing someone. The usual components:
- Payroll taxes. The employer's share of Social Security and Medicare (FICA), plus federal and state unemployment (FUTA/SUTA). In Canada, the equivalent is CPP and EI employer contributions.
- Workers' compensation. Priced per $100 of payroll and highly trade-dependent. Roofing and framing cost far more than trim carpentry.
- General liability insurance allocated to labor.
- Benefits. Health coverage, retirement match, any allowances.
- Paid time off. Vacation, holidays, sick days. You pay for hours that aren't billable to a job.
- Other. Training, uniforms, small tools, phone allowances.
The formula
Your burden rate is total annual burden costs divided by total productive (billable) hours. Then your fully burdened rate is the wage plus burden per hour.
Step 1: add up annual burden costs for one worker. Taxes, comp, insurance, benefits, PTO value.
Step 2: find productive hours. Start from 2,080 paid hours a year, then subtract non-billable time (vacation, holidays, sick, downtime). A realistic number is often 1,800 to 1,900 hours.
Step 3: divide and add.
- Burden per hour = annual burden costs / productive hours.
- Fully burdened rate = hourly wage + burden per hour.
A worked example
Say a worker earns $30/hour ($62,400 for 2,080 hours). Annual burden costs come to $14,000 (taxes, comp, insurance, benefits, PTO). Productive hours are 1,850.
- Burden per hour = $14,000 / 1,850 = $7.57
- Fully burdened rate = $30 + $7.57 = $37.57/hour
That worker's true cost is roughly 25% above the wage. Price your labor at $30 and you eat the difference on every job.
Why the "productive hours" step matters most
The mistake that hurts most isn't forgetting a tax. It's dividing burden across all 2,080 paid hours instead of the roughly 1,850 you can actually bill. You're paying for the vacation and downtime whether or not a customer does, so those costs have to be recovered across the hours that are billable. Skip this and your burden rate comes in too low.
Burden vs. markup: don't double-count
Labor burden is a cost, not profit. It belongs in the cost side of your estimate, right alongside materials and subs. Your markup and overhead and profit get added on top of the fully burdened cost. Keep the two separate: burden makes your cost honest; markup makes the job profitable.
Keep your rate current
Comp rates change, benefit costs rise, and your billable-hour reality shifts season to season. Recalculate your burden rate at least once a year, and check it against your actual job-costing history. If crews are consistently costing more per hour than your burden rate assumes, the rate is stale. For wage benchmarks by trade and region, the Construction Price Index is a useful cross-check.
Where this fits
A correct burden rate is a cornerstone of the budgeting and job costing cluster and a prerequisite for real construction project management. You can't track profit on a job if the labor cost was wrong from the start.
Put it to work
The free estimating tool lets you build labor lines at a fully burdened rate so your bids reflect true cost, not just wages. TradesMetrics then tracks actual labor against that estimate as the job runs. See how it works.