Labor burden is everything you pay on top of a worker's wage because that worker is on your payroll. To calculate it, add up every employer-paid cost tied to your field employees for a year, divide by their total base wages, and you have your burden rate. Multiply a wage by that rate, add it back, and you have a burdened hourly cost. Below is the full calculation, one worked example for an electrician, and how to carry the number into your bids and your job cost reports.
TL;DR
- Burden rate = total employer costs tied to field labor ÷ total base wages. Burdened hourly cost = base wage plus that burden, spread over the hours the worker is actually productive.
- Include employer payroll taxes, workers' comp, liability charged on payroll, health and retirement, paid time off, training, PPE and tools. Leave out employee withholdings and office overhead.
- In our worked example, a $38 electrician costs about $54.98 per productive hour, not $38 and not even $51.81 if you ignore paid time off.
- Put the burdened rate in every labor line of the estimate, then compare estimated and actual hours by cost code to catch labor variance while the job is still open.
Table of Contents
- What labor burden means for a trade sub
- What goes into labor burden
- The labor burden calculation, step by step
- Worked example: a $38 electrician
- Using burdened labor in an estimate
- Labor efficiency variance and labor variance analysis
- Common mistakes in labor burden calculation
- Perspective
- Put your burdened rate to work
- Building a simple annual routine
- FAQ
- Sources
What labor burden means for a trade sub
When you hire a journeyman, the wage is only the start. You also pay the employer half of Social Security and Medicare, unemployment taxes, workers' comp premiums, and whatever benefits you offer. You pay these because the person works for you, and most of them grow as wages and hours grow. That is labor burden.
The Bureau of Labor Statistics gives a sense of scale. In Q2 2026, employer costs for natural resources, construction and maintenance workers averaged $48.59 per hour, made up of $32.96 in wages and $15.63 in benefits. Divide the second number by the first and benefits alone add about 47% on top of wages in that group. BLS also reports that benefits made up roughly 30.5% of total compensation for private construction workers in the same quarter. Those are national averages that include legally required costs and benefits. Your own number depends on your state, your trade's workers' comp class codes and the benefits you offer.
The takeaway: a burden rate of 30% to 50% on top of wages is normal. A rate of zero in your estimate is not.
Labor burden vs. overhead
The two get mixed up constantly, and it costs subs money.
- Labor burden follows the worker. If a crew works 400 hours on a job, 400 hours of payroll tax, comp and benefits attach to that job.
- Overhead keeps the company open whether or not a given job exists: office rent, the estimator's and bookkeeper's salaries, insurance on the business, software, advertising, your truck for sales calls.
A quick test: if the cost goes up or down with field hours, it is burden. If it stays put when a job is added or dropped, it is overhead. Burden goes into the labor line of the estimate. Overhead is recovered through markup. If you bury burden inside a single overhead percentage, your labor-heavy jobs (drywall, framing, masonry) get underpriced and your material-heavy jobs get overpriced. You then win the wrong work and lose the right work.
A related point for foremen: a working foreman is burden when he is on the tools and billing hours to a job. When you hire a foreman who spends his time running crews and not building, part of that cost starts to behave like overhead. Our piece on how hiring foremen affects overhead in specialty trades walks through where that line falls.
What goes into labor burden
Start with a list. Pull twelve months of payroll records and your insurance invoices, then sort each cost into one of these buckets.
Required by law or contract
- Employer Social Security and Medicare. For 2026 the employer rate is 6.2% for Social Security (up to a $184,500 wage base) and 1.45% for Medicare, with no Medicare wage cap. That is 7.65% on most field wages.
- Federal unemployment (FUTA) and state unemployment (SUTA). SUTA rates vary by state and by your claims history, so use the rate on your state notice.
- Workers' compensation. This is usually the largest single item for a trade sub, and it varies a lot by trade and classification. Roofing and steel/rebar sit far higher than painting or low-voltage. Use your actual premium, not a rule of thumb.
- General liability, if your carrier charges it on payroll.
- Local payroll or job-training taxes, where they apply, and union fringe contributions if you are signatory.
Benefits and employee-specific costs
- Employer share of health, dental, life and disability insurance.
- Retirement match.
- Paid holidays, vacation and sick pay.
- Training, apprenticeship costs, required safety certifications.
- PPE, uniforms, small tools, phones, and company vehicles assigned to a crew.
What does not belong
- Income tax withheld from the employee's check. That is the employee's money passing through you.
- The employee's share of Social Security, Medicare and benefit premiums. These are already inside the gross wage or deducted from it.
- Office rent, administrative salaries, accounting fees, advertising. Those are overhead.
One judgment call: equipment. Small tools and PPE that go to the individual are fair burden. Heavy equipment such as lifts, scaffold, mixers and trucks is better costed on its own line per day or hour. We cover that in how equipment costing works for contractors, and it keeps your burden rate from ballooning with costs that do not follow wages.
The labor burden calculation, step by step
- Pick a period and a group. Use a full year, and field employees only. Calculate separately for groups with very different comp codes, such as installers and laborers.
- Add up base wages. Total gross wages paid to that group, excluding overtime premium if you want a clean straight-time rate (more on overtime below).
- Add up the employer costs from the lists above for the same people and period.
- Divide. Burden rate = employer costs ÷ base wages.
- Apply it. Burdened wage = base wage × (1 + burden rate).
- Adjust for productive hours. Paid hours include holidays, vacation and sick time that produce nothing billable. Fully burdened cost per productive hour = (total wages + total burden) ÷ productive hours.
Steps 5 and 6 are where most spreadsheets go wrong. Step 5 gives a shortcut. Step 6 gives the truth.
Worked example: a $38 electrician
The figures below are an illustration, not a benchmark. Swap in your own.
Assume one journeyman electrician, $38 per hour, 2,080 paid hours a year, of which 120 are paid holidays and vacation.
| Item | Basis | Annual cost |
|---|---|---|
| Base wages | $38 × 2,080 | $79,040.00 |
| Employer Social Security and Medicare | 7.65% | $6,046.56 |
| FUTA and SUTA | 3.0% (state-dependent) | $2,371.20 |
| Workers' compensation | 9.0% (class-code dependent) | $7,113.60 |
| General liability on payroll | 2.0% | $1,580.80 |
| Health and retirement | $5.00 × 2,080 | $10,400.00 |
| Training, PPE, small tools | flat | $1,200.00 |
| Total burden | $28,712.16 |
Burden rate: $28,712.16 ÷ $79,040 = 36.3%.
Quick burdened wage: $38 × 1.363 = $51.81 per hour.
Fully burdened cost: $79,040 + $28,712.16 = $107,752.16. Divide by 1,960 productive hours (2,080 minus 120 paid time off) and you get $54.98 per productive hour.
That is $3.17 an hour more than the shortcut. On a 600-hour job, the gap is about $1,900. If your crew also loses time to weather, shop runs and material pickups, and you only get 1,800 billable hours, the same man costs $59.86 an hour. Decide on a realistic productive-hour number and write it down.
Note what we left out: markup and profit. The burdened rate is your cost. Overhead and profit go on top of it.
Overtime and the cap on wage-based taxes
Two details change the rate through the year. Overtime hours carry the same percent-of-wage burden (taxes, comp) but not the flat per-hour items such as health premiums, so the burden percentage on overtime hours is lower, while the dollar amount is higher. Also, Social Security stops at the wage base, so high earners' burden drops late in the year. For bidding, most subs use one blended annual rate per trade and per classification. Recalculate when your comp premium renews, when your state unemployment rate changes, or when you change benefits.
Using burdened labor in an estimate
A takeoff gives you quantities. Labor units give you hours per unit. The burdened rate turns hours into dollars.
Labor cost = quantity × labor units (hours per unit) × burdened hourly rate.
Example: 2,400 linear feet of 3/4 inch EMT at 0.045 hours per foot is 108 hours. At the $54.98 rate from above, that is $5,938 in labor cost before overhead and profit. Leave burden out and you would carry $4,104 at the raw wage, an error of more than $1,800 on one line.
If you want worked examples of how hours per unit are built, see our electrical labor units examples and the masonry labor units guide. Both use burdened rates in the dollar step.
A few habits that keep this clean:
- One rate per trade and class. A plumber, an apprentice and a laborer should not share a burden rate.
- Keep burden visible. Show base wage, burden and burdened rate as separate fields in your workbook or software, so you can see where a number came from.
- Use your own production data. Published labor units are a starting point. Your crews' actual hours per unit, from your own completed jobs, predict your next bid better than any generic table.
- Mind location. A crew sent out of state or into a union jurisdiction can carry a different burden. Do not use your home rate by default.
Labor efficiency variance and labor variance analysis
Once you have a burdened rate, you can measure what the field did against what you bid. Two variances matter.
Efficiency (hours) variance = (actual hours − estimated hours) × estimated burdened rate.
Rate variance = (actual burdened rate − estimated burdened rate) × actual hours.
Example: you bid a drywall hang at 400 hours and $55 an hour, or $22,000. The crew logs 460 hours at a real cost of $58 an hour, or $26,680. The total labor overrun is $4,680.
- Efficiency variance: 60 extra hours × $55 = $3,300 unfavorable.
- Rate variance: $3 × 460 = $1,380 unfavorable.
The split tells you what to fix. The first is a production problem: access, rework, material delays, a bad labor unit, or a crew that needed a better foreman. The second is an estimating problem: you used the wrong wage or burden, or you staffed the job with more expensive people than you priced.
You can also express efficiency as a ratio. A labor productivity factor of estimated hours divided by actual hours gives 400 ÷ 460 = 0.87 here. Anything under 1.0 means the crew took longer than the bid assumed. Our field guide to labor productivity factors shows how subs use that number to adjust future bids.
Do it by cost code, not by job
A job total hides the problem. If rough-in is 20% over and trim is 15% under, the job looks fine and you learn nothing. Track hours by cost code or phase, weekly. Our write-up on cost code variance analysis shows how a $3,000 labor gap becomes visible at that level while there is still time to act.
This only works if the hours are right. That means foremen coding time to the correct phase every day, not reconstructing a week from memory on Friday. See how foremen track crew hours on the job site and the broader crew productivity tracking guide for methods that hold up in the field. For ironwork, the steel contractor timecard collection methods piece covers the same problem.
Common mistakes in labor burden calculation
- Using last year's comp rate. Premiums reset at renewal and get audited. Update the rate when they change.
- Applying one blended rate to every employee. A $22 laborer and a $45 foreman carry different percentages, because flat-dollar costs like health premiums weigh more on lower wages.
- Dividing by paid hours instead of productive hours. This is the $3-an-hour error above.
- Counting the employee's share of taxes as burden. Withholdings are not your cost.
- Folding burden into overhead. It hides which jobs are profitable.
- Ignoring burden on owners and working foremen who bill field time.
- Setting it once and never checking it. Compare the rate you bid against actual payroll cost per hour every quarter.
Perspective
We have seen the same pattern in sub after sub: the bid was fine on quantities and the margin disappeared in the labor line. Usually it was not one big mistake. It was a burden number set three years ago, a crew that logged hours to the job instead of the cost code, and a job cost report that arrived after the job closed.
That is why we built Subascent around the sub's actual workflow. The burdened rate belongs in the estimate, the field hours belong in the same system as the estimate, and the comparison between the two should be waiting for the project manager before the job is finished. Our approach is to connect bid, takeoff, crew hours and profit analytics so that estimated versus actual labor is a report you open, not a spreadsheet you rebuild.
If you take one thing from this article, take the productive-hours step. Most of the money we see leaking is in the difference between paid hours and billable hours.
Dave
Put your burdened rate to work
A correct rate is only useful if it reaches the estimate and the job cost report without being retyped. Subascent is job and bid management software built for specialty trade subs. You can use it to estimate with your own labor rates, take off from PDF plans, collect field hours through the free CrewTrack mobile app for foremen, and compare budget to actual by job. Plans start at $49 per month for Starter, $99 per month for Scale and $179 per month for Pro, with PDF takeoff available as a $99 per month add-on. See the plans and pricing or read about estimating and takeoff features.
If you bill by the job and want field hours to match your invoicing, the invoicing and financials page shows how the pieces connect.
Building a simple annual routine
You do not need to redo this every week. A yearly routine is enough for most 1 to 50 person shops:
- January: Recalculate burden by trade and classification using the prior year's payroll and your new comp, SUTA and benefit rates.
- Each renewal: Update the rate when your workers' comp or health plan changes.
- Monthly: Check payroll cost per hour against the rate in your estimates.
- At job close: Record actual hours per unit by cost code, and feed the results back into your labor units.
That last step is what separates shops that keep getting better at bidding from shops that keep repeating the same loss.
FAQ
What is a typical labor burden rate for construction?
It varies by trade, state and benefits. National BLS data show benefits alone running at roughly 47% of wages for construction and maintenance workers in Q2 2026, and that includes more than just what a small sub pays. Calculate your own rate from payroll and insurance records instead of borrowing a percentage.
How much does a $100,000 salary actually cost an employer?
Add employer payroll taxes, workers' comp, benefits and any paid-time costs. Using 7.65% for Social Security and Medicare alone adds $7,650 before anything else. With comp, unemployment and health coverage, the full cost for a field employee commonly lands well above $125,000, depending on your premiums and plan.
Is labor burden included in overhead?
No. Burden follows field labor hours and goes in the labor line of the estimate. Overhead is the fixed cost of running the business and is recovered through markup. Keeping them separate shows you which jobs earn money.
How do I calculate a fully burdened hourly rate?
Add base wages and total employer burden for the year, then divide by productive hours, not paid hours. In our example, $107,752.16 over 1,960 productive hours gives $54.98 for a $38 electrician. Add overhead and profit afterward.
How often should I update my burden rate?
At least once a year, and whenever workers' comp, state unemployment or health benefits change. Check it against actual payroll cost per hour each quarter.
Sources
- Employer costs for employee compensation, Table 2 (BLS, Q2 2026)
- Benefits as a share of total compensation, private construction (BLS, Q2 2026)
- Social Security and Medicare tax rates, 2026 (IRS Publication 926)