Course outline
Burdened labor rates: what an hour of labor really costs
A burdened labor rate is the base wage plus everything you pay because of that wage: employer payroll taxes (7.65% FICA, plus federal and state unemployment), workers' compensation insurance, benefits, and paid time off. Then divide by the share of paid hours that are actually productive on the job. A $30 wage can easily cost $40 or more per paid hour, and more again per productive hour.
By Michael Reddy, IntelBid
After this lesson you can
- List every cost that belongs in a burdened labor rate
- Calculate cost per paid hour and per productive hour
- Keep burden current as taxes, insurance and benefits change
What goes into labor burden?
| Cost | How it's calculated | Where the number comes from |
|---|---|---|
| Employer FICA | 7.65% of wages — 6.2% Social Security (up to the annual wage base) plus 1.45% Medicare | Federal law |
| Federal unemployment (FUTA) | 6.0% on the first $7,000 per employee, typically 0.6% after the state credit | Federal law; some states pay more |
| State unemployment (SUTA) | Your assigned rate on a state wage base | Your state's rate notice — varies widely |
| Workers' compensation | A rate per $100 of payroll for each class code | Your policy — varies by state, class and claims history |
| Health, retirement, other benefits | Your cost per employee, converted to an hourly figure | Your plans |
| Paid time off and holidays | Wages paid for hours not worked | Your policy |
| Liability insurance (if payroll-rated) | A rate on payroll | Your policy — some carriers rate on revenue instead |
How do you calculate the rate?
- Base wage
- $30.00 / hour
- Employer FICA
- 7.65%
- Federal + state unemployment (example)
- 3%
- Workers' comp (example)
- $8.00 per $100 of payroll
- Benefits (example)
- $4.00 / hour
- Paid time off (example)
- 5% of wage
- Productive share of paid hours (example)
- 85%
- Payroll taxes: $30 × (7.65% + 3%) = $3.20 ($2.30 FICA + $0.90 unemployment).
- Workers' comp: $30 × 8 ÷ 100 = $2.40.
- Benefits: $4.00. Paid time off: $30 × 5% = $1.50.
- Cost per paid hour: $30 + $3.20 + $2.40 + $4.00 + $1.50 = $41.10 — a 37% burden.
- Only 85% of paid hours install flooring: $41.10 ÷ 0.85 = $48.35 per productive hour.
Work out your burdened rate
Burdened labor calculatorDefaults other than FICA are examples. Use your payroll provider's tax rates, your workers' comp policy and your real benefit costs.
- Cost per paid hour
- $41.10
- Burden on top of wage
- 37.0%
- Cost per productive hour
- $48.35
Taxes $3.20 · workers' comp $2.40 · benefits $4.00 · paid time off $1.50 per paid hour. Unemployment taxes stop at annual wage bases, so a flat percentage slightly overstates them for full-year employees.
Price labor on the productive-hour rate. Start your free trial
Why productive hours matter
You pay for hours spent loading the truck, driving between jobs, waiting on the elevator, attending safety meetings and picking up material. If your production rates are measured on installing hours only, your labor rate has to be per productive hour — otherwise the non-productive time is priced nowhere. If you price travel, handling and meetings as their own lines instead, use the per-paid-hour rate for those lines.
Put your burdened rate to work
A burdened rate is only useful once it's in a price. Enter it below with the crew days a scope needs and your material cost, and you get a unit price with your margin built in — the same scope calculator that's inside IntelBid's proposal builder.
Price one scope
Scope calculatorThe same calculator that's built into IntelBid's proposal and change order builders. Enter the crew days and your material cost — your crew, hours, rates and margin are remembered in this browser.
- Total cost
- $12,511
- Labor $2,560 · material $9,951
- Sell price
- $25,022
- $12,511 gross profit at 50% margin
- Unit price
- $8.34 / SF
- 750 SF per crew-day
In IntelBid this applies straight to a proposal line and remembers the numbers for that scope. Start your free trial
Keep it current
- Recalculate at least yearly — when your unemployment rate notice arrives, your workers' comp renews, and benefit costs change.
- Keep a rate per role — installer, helper, lead — rather than one average for everyone.
- Watch wage-base effects: Social Security and unemployment taxes stop once an employee passes the annual wage base, so a flat percentage slightly overstates burden for high earners. That's usually a safe error for bidding.
What is a burdened labor rate?
The full hourly cost of an employee: base wage plus employer payroll taxes, workers' compensation, benefits and paid time off, often divided by the share of paid hours that are productive.
What is a typical labor burden percentage?
It varies too much to use someone else's number — state unemployment rates, workers' comp class codes, claims history and benefits differ by company. Calculate your own from your payroll, policy and benefit costs.
Should workers' comp be in the labor rate or overhead?
Workers' comp is charged on field payroll, so it belongs in the burdened labor rate for field workers. Office staff comp belongs in overhead.
Key points
- Burden = payroll taxes + workers' comp + benefits + paid time off.
- Divide by productive share of paid hours when your production rates are installing-only.
- Recalculate yearly, per role, from your own payroll and policies.
Get new lessons, plus $100 toward IntelBid
New modules as they're published. Confirm your email and we'll send a $100 credit toward your IntelBid membership.
About the author. Michael Reddy builds IntelBid, bid management software for commercial flooring subcontractors. These lessons come from the bid desk: how the work is priced, won and paid for.