Contractor Finance Glossary
What is Labor Burden?
Also called: fully-loaded labor cost, burden rate
Labor burden is everything you pay for a worker beyond the base wage: payroll taxes, workers compensation, and benefits. Fully-loaded labor cost is the base wage plus that burden.
The base wage is what the worker sees. The burden is what the business pays on top: employer FICA (7.65%), federal and state unemployment, workers compensation (which is high for field trades), and benefits like health, retirement, and PTO. For the trades, burden commonly runs 30 to 50% on top of the wage.
The reason it matters is pricing. Contractors who bid off the base wage instead of the fully-loaded cost give away margin on every job without knowing it. And because only part of the paid day is billable, the true cost per billable hour is often 60 to 100% above the wage.
How it is calculated
Labor burden rate = (payroll taxes + workers comp + benefits) divided by base wage. Fully-loaded hourly cost = base wage + burden. Cost per billable hour = fully-loaded cost divided by the billable share of the paid day.
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