Labor Burden Calculator

The number that separates busy from profitable

Ask most small contractors what an employee costs and you get the wage. That number is wrong by a third to a half, and it is why crews can be flat out for a year and end it with nothing in the bank. A $30 an hour employee typically costs $42 to $48 an hour fully burdened, and the rate you actually have to bill to break even is higher still.

There are two separate calculations here and conflating them is the classic mistake.

Burdened cost = (wages + taxes + insurance + benefits + allowances) ÷ paid hours

Cost per billable hour = the same annual cost ÷ the hours you can actually sell

The first tells you what the person costs. The second tells you what you have to charge. They are not the same number and the gap between them is usually 25 to 40%.

What stacks on top of the wage

Payroll taxes — about 10-11%. Employer FICA is 7.65% and it is not optional. FUTA is 0.6% effective on the first $7,000 of wages. SUTA varies wildly: a new employer in a low-rate state might pay 1%, an employer with a claims history in a high-rate state can pay 8% or more. Check your annual rate notice rather than assuming.

Workers' compensation — anywhere from nothing much to a fortune. This is the line that varies more than any other, and it is priced per $100 of payroll against a trade classification code. Clerical work runs around $0.30. Electrical is roughly $3.50. Framing carpentry sits near $16. Roofing routinely exceeds $25 per $100 — meaning a quarter of the wage again, on top of the wage. On a $30/hr roofer that is $7.50 an hour before anything else.

Two things follow from that. First, you cannot use one blended burden number across a mixed crew: the roofer and the estimator are not remotely comparable. Second, misclassifying an employee into a cheaper code to save premium is fraud, and the audit at the end of the policy year is specifically designed to catch it.

Health insurance and retirement. A $650 monthly contribution is $7,800 a year, which on 2,080 hours is $3.75 an hour — larger than most people's mental allowance for it. A 3% match on a $62,400 wage is another $1,872.

Training, tools, PPE and licences. Boots, harnesses, hard hats, blades, small tools that walk off, continuing education, licence renewals. Fifteen hundred to three thousand a year per field employee is normal and it is real money.

The non-billable multiplier nobody applies

This is the part that gets left out entirely, and it is the biggest single lever in the whole calculation.

You pay for 2,080 hours a year. Twelve days off removes 96 of them. Of the 1,984 left, some proportion is not sellable to anybody: driving between jobs, loading the truck, the supply-house run, the warranty callback, standing around because the inspector has not turned up, cleaning the shop on a rain day. Fifteen percent is optimistic for most residential crews; 20 to 25% is closer to the truth for service work with a lot of windshield time.

At 15% non-billable and 12 days off, 2,080 paid hours becomes about 1,686 sellable hours. Every dollar of annual cost now has to be recovered over 81% of the hours you are paying for, which lifts the cost per billable hour by roughly 23% over the burdened cost. That is the step people miss, and it is exactly the size of the margin they think they are making.

A worked example

A $30/hr carpenter, 12 days off, 15% non-billable, $650/month health, 3% match, $1,800 tools, carpentry comp at $8.00:

• Annual wage: $30 × 2,080 = $62,400
• Payroll taxes at 10.95%: $6,833
• Workers' comp at $8.00 per $100: $4,992
• Health insurance: $7,800
• Retirement match: $1,872
• Tools and training: $1,800
• Total annual cost: $85,697
• Burdened hourly: $85,697 ÷ 2,080 = $41.20, a 37% burden
• Sellable hours: (2,080 − 96) × 0.85 = 1,686
• Cost per billable hour: $85,697 ÷ 1,686 = $50.83

Bill that carpenter at $45 an hour and you are losing money on every hour worked while feeling busy. Swap the trade to roofing and the comp line alone jumps from $4,992 to $15,600, pushing the cost per billable hour past $57.

Overhead comes after this

The billable rate this calculator returns covers the employee and your target margin on labor. It does not cover the truck, the yard, the general liability policy, the phone that rings, the estimator's time, or the accountant. Those are overhead, and the usual approach is to recover them as a percentage on top of all direct costs — commonly 10 to 20% of revenue for a small residential contractor.

So the sequence is: burdened cost, then cost per billable hour, then overhead recovery, then profit. Skip the middle step and the last one disappears.