Guide
How to calculate labor burden rate for contractors
Every contractor paying an employee at $25/hr is actually paying $31–38/hr once taxes, insurance, and overhead are included. Estimating with the wage rate instead of the burden rate causes systematic underpricing on every labor-intensive job.
What labor burden rate includes
Labor burden = all costs above and beyond the base wage that the employer is required to pay or has committed to pay.
FICA — Social Security
6.2% of wages (employer match, up to $168,600 in 2024)
FICA — Medicare
1.45% of all wages (no wage cap)
FUTA — Federal Unemployment
0.6% on first $7,000 of wages per employee
SUTA — State Unemployment
Varies by state and experience rating, typically 1.5–4%
Workers Compensation
Varies by trade classification: 3–6% for light work, 8–18% for framing, roofing, concrete
General Liability Insurance
Typically 2–5% of payroll, depending on trade risk
Benefits (if offered)
Health insurance, retirement contributions, PTO — varies widely
Tools and small equipment
If employer-provided, often 1–3% of wages
The burden rate formula
Burden Rate % = Total Burden Costs ÷ Base Wage Cost × 100
True Hourly Cost = Base Wage × (1 + Burden Rate)
Worked example: framing carpenter at $28/hr
| Cost component | Rate | Per hour |
|---|---|---|
| Base wage | — | $28.00 |
| FICA SS (6.2%) | 6.2% | $1.74 |
| FICA Medicare (1.45%) | 1.45% | $0.41 |
| FUTA/SUTA (est. 2.5%) | 2.5% | $0.70 |
| Workers comp — framing (12%) | 12% | $3.36 |
| General liability (3%) | 3% | $0.84 |
| Total burden | — | $7.05 |
| True hourly cost | 25.2% burden | $35.05 |
If you estimate this carpenter at $28/hr, you are losing $7.05 on every hour they work — before accounting for overhead or profit.
Typical burden rates by trade
| Trade | Workers comp class | Typical burden rate |
|---|---|---|
| Landscaping / irrigation | 0042 | 22–28% |
| Painting (exterior) | 5474 | 24–30% |
| HVAC technician | 5537 | 20–26% |
| Plumbing | 5183 | 22–28% |
| Electrical | 5190 | 20–25% |
| Framing / carpentry | 5645 | 26–34% |
| Roofing | 5551 | 30–40% |
| Concrete / masonry | 5207 | 28–36% |
Workers comp rates vary significantly by state and individual experience modifier. Verify your actual rate with your insurer.
How to use burden rate in estimates
Once you know your burden rate, the estimating math is straightforward:
Labor cost = Hours × Base Wage × (1 + Burden Rate)
Example: 80 hours × $28 × 1.252 = $2,804 true labor cost
vs. estimating at wage only: 80 × $28 = $2,240 — missing $564 per 80 hours
Calculate yours in 60 seconds
Enter your base wage, state, and trade classification. Burden Command returns your true hourly cost and burden rate.
Open Burden Command →Related