Labor Burden Rate: What It Is and How to Calculate It
Misunderstanding burden rate is one of the most common reasons contractors lose money. This guide explains every component, shows typical rates by trade, and walks through the full calculation.
If you pay a carpenter $40 per hour, that carpenter does not cost you $40 per hour. The true cost is closer to $52–$56 per hour once you account for everything the government requires you to pay on top of wages. That gap is called the burden rate, and not knowing your number means every labor-heavy job is priced based on a fiction.
What Is Labor Burden Rate?
Labor burden is the total employer cost of a worker beyond their base wage. It's expressed as a percentage of the base wage. A 30% burden rate on a $40/hr wage adds $12/hr in employer costs, making the true hourly cost $52.
Burden is separate from overhead (office costs, truck, marketing) — burden is specifically the mandatory and voluntary costs tied directly to the employment relationship.
The Components of Labor Burden
Mandatory (federal and state requirements)
| Component | Employer Cost | Notes |
|---|---|---|
| FICA — Social Security | 6.2% | On first $168,600 of wages (2024) |
| FICA — Medicare | 1.45% | No wage cap; +0.9% over $200k |
| FUTA (federal unemployment) | 0.6–6.0% | Typically 0.6% after state credit |
| SUTA (state unemployment) | 1–8% | Varies widely by state and experience rate |
| Payroll tax subtotal | ~9–16% |
Insurance
| Component | Typical Cost | Notes |
|---|---|---|
| Workers' Compensation | 5–25% of wages | Biggest variable — depends on trade classification |
| General Liability (labor portion) | 2–8% | Often allocated per employee |
| Insurance subtotal | 7–33% |
Workers' comp rates vary dramatically by trade. Roofing can run 20–30%+ of wages. Office work is under 1%. If you're using a flat burden rate across all trades, you're almost certainly undercharging for high-risk labor.
Benefits (voluntary but competitive)
| Benefit | Cost Range |
|---|---|
| Health insurance contribution | $200–$600/month per employee |
| Paid time off (vacation, sick) | 4–8% of wages |
| Holidays paid | 1.5–3% of wages |
| Retirement contribution (401k match) | 0–6% of wages |
| Benefits subtotal | 0–15%+ |
Typical Total Burden Rates by Trade
| Trade | Typical Burden Rate | Workers' Comp Driver |
|---|---|---|
| Roofing | 35–50% | Workers' comp 20–30%+ |
| Concrete / Masonry | 28–40% | Workers' comp 10–20% |
| Framing / Carpentry | 28–38% | Workers' comp 10–18% |
| Plumbing | 28–38% | Workers' comp 8–15% |
| Electrical | 26–35% | Workers' comp 5–12% |
| HVAC | 28–38% | Workers' comp 8–15% |
| Painting (interior) | 24–33% | Workers' comp 6–12% |
| Landscaping | 28–40% | Workers' comp 8–18% |
| Drywall | 26–36% | Workers' comp 8–14% |
These are approximate ranges. Get your actual workers' comp rate from your policy — it's the biggest variable and most contractors get it wrong.
Enter each worker's wage and your burden rate — the estimator calculates burdened cost, loaded rate, and billable price per hour.
How to Calculate Your Actual Burden Rate
- Pull your workers' comp premium from your insurance policy and divide by your annual payroll. This is your WC rate.
- Add payroll taxes: 7.65% FICA + your FUTA/SUTA rate (check your state's rate on your tax filings).
- Add benefits: Convert annual benefit costs per employee to a percentage of their annual wages.
- Total all three categories.
Example for a framing crew member:
- FICA: 7.65%
- FUTA/SUTA: 2.5%
- Workers' comp: 14.0%
- GL insurance portion: 3.5%
- PTO (2 weeks): 3.8%
- No health or retirement benefits offered
- Total burden: 31.45%
On a $48/hr carpenter, that's $48 × 1.3145 = $63.10/hr true cost before overhead or profit.
Burdened Rate vs. Loaded Rate
These are different stages of the same calculation:
- Base wage — $48/hr
- Burdened rate — base + burden = $63.10/hr (what it actually costs you to have this person working)
- Loaded rate — burdened + overhead allocation = $63.10 × 1.20 = $75.72/hr (cost with business overhead included)
- Billable rate — loaded ÷ (1 − profit margin) = $75.72 ÷ 0.72 = $105.17/hr (what you charge the client)
Many contractors skip from base wage to billable rate by applying a single multiplier. The problem is that multiplier is a guess — it may or may not cover everything. Building through all four layers with your actual numbers gives you a defensible price.
Common Burden Rate Mistakes
- Using the same rate for all workers regardless of trade classification. A roofing laborer has 3× the workers' comp rate of an interior painter.
- Forgetting GL insurance. General liability is usually billed as a percentage of payroll — it belongs in burden, not just overhead.
- Not updating rates annually. Workers' comp experience modifiers change yearly. Your burden rate from three years ago is probably wrong.
- Using wage to calculate burden instead of gross pay. If a worker earns overtime or bonuses, the burden applies to the higher gross amount.
- Not including subcontract workers' comp certificates. If a sub doesn't carry their own workers' comp, you may be liable. That changes your rate.
Full Worked Example: Two-Man Plumbing Crew
Journeyman plumber at $72/hr, apprentice at $38/hr. Burden rate 32%. Overhead 18%. Target margin 28%.
| Journeyman | Apprentice | |
|---|---|---|
| Base wage/hr | $72.00 | $38.00 |
| Burdened (×1.32) | $95.04 | $50.16 |
| Loaded (+18% overhead) | $112.15 | $59.19 |
| Billable (÷0.72 margin) | $155.76/hr | $82.21/hr |
| Daily rate (8 hrs) | $1,246 | $658 |
Two-man crew daily rate: $1,904. Three-week job: $28,560.
Compare to the naive calculation ($72 + $38) × 8 × 15 = $13,200 — less than half the correct number. The rest covers burden, overhead, and profit. This isn't padding — it's the actual cost of running a legitimate business.
Build a complete crew rate card with per-worker breakdowns, burden, overhead, and profit margin.