Labor Burden Calculator: What Your Employees Actually Cost

$62,400. That’s what you think your $30/hr carpenter costs you per year. The real number is closer to $87,000.

The difference? Labor burden. And if you’re not calculating it, every estimate you send is wrong.

I’ve watched contractors go under because they charged $35/hr for a guy they were paying $30, thinking that $5 spread covered everything. It doesn’t even come close. Between payroll taxes, workers comp, insurance, and PTO, your actual cost per employee runs 30% to 50% above their base wage, depending on how your benefits are structured.

Quick Answer: What Is a Typical Labor Burden Rate?

Most construction companies carry a labor burden rate between 30% and 45% of base wages. That means a worker earning $25/hr actually costs $32.50 to $36.25/hr before you add a single dollar of overhead or profit. The burden includes mandatory payroll taxes (FICA at 7.65%, federal and state unemployment at 3-4%), workers compensation insurance (5-20% depending on trade and state), and any benefits you provide like health insurance, PTO, or retirement contributions.

Use our Burdened Labor Rate Calculator to plug in your specific numbers and get your true hourly cost in seconds. Or Try EstimationPro free to build estimates that automatically factor burden into every labor line item.

Every Dollar That Goes on Top of the Paycheck

Here’s what most contractors miss. Your employee’s hourly wage is just the starting point. On top of that, you’re on the hook for:

Payroll Taxes (Non-Negotiable)

• Social Security: 6.2% of wages up to $176,100 (2026 wage base)
• Medicare: 1.45% of all wages, no cap
• FICA total: 7.65% - this one hits every single dollar you pay
• FUTA (Federal Unemployment): 6% on first $7,000 of wages, but the effective rate drops to 0.6% after the SUTA credit
• SUTA (State Unemployment): Varies wildly. New employers often pay 3-4%, experienced employers with clean history can get down to 1% or lower in some states

Combined payroll tax burden: roughly 11-13% of base wages for a typical construction employer.

Workers Compensation Insurance

This is where it gets expensive. Workers comp rates are based on your trade classification, your state, and your experience modification rate (EMR). A clean safety record saves real money here.

Trade Classification	Typical Rate (per $100 payroll)
General laborer	$4.50 - $9.00
Carpentry	$8.00 - $16.00
Roofing	$15.00 - $30.00
Electrical	$4.00 - $8.00
Plumbing	$5.00 - $10.00
Concrete/masonry	$9.00 - $18.00

Source: NCCI rate filings and state insurance bureau data, 2025-2026. Rates vary significantly by state and individual EMR.

That table is why I tell every contractor: your workers comp rate is the single biggest variable in your labor burden. A roofer’s burden looks nothing like an electrician’s. My carpentry crew runs about 12% for workers comp alone, which is $3.60/hr on a $30 base wage.

Health Insurance

If you offer it (and you should, if you want to keep good people), employer contributions for construction workers typically run:

• Individual coverage: $300 - $500/month employer share
• Family coverage: $800 - $1,500/month employer share

According to the Kaiser Family Foundation 2025 Employer Health Benefits Survey, the average employer contribution for single coverage was $7,188/year. Smaller firms often pay less. For our calculations, I’ll use $500/month ($6,000/year) as a realistic mid-point for single employee coverage.

PTO, Holidays, and Paid Leave

Every hour your employee takes off that you’re paying for adds to the burden:

• 6 paid holidays: 48 hours
• 1 week PTO: 40 hours
• Sick days (state mandated in many areas): 24-40 hours

That’s roughly 112-128 paid non-productive hours per year. At $30/hr, that’s $3,360 to $3,840 in labor cost producing zero revenue.

The Small Stuff That Adds Up

• Safety training and OSHA compliance: $200 - $500/year per employee
• PPE and small tools: $300 - $800/year per employee
• Drug testing and physicals: $100 - $300/year per employee
• Uniforms and company gear: $200 - $400/year per employee

None of these individually will sink you. Combined, they add another $800 to $2,000 per employee per year.

Worked Example #1: Carpenter at $30/hr

Let’s run the full calculation for a carpenter earning $30/hr working 2,080 hours per year (40 hrs/week x 52 weeks).

Base annual wage: $62,400

Burden Component	Annual Cost	% of Base
FICA (7.65%)	$4,774	7.65%
FUTA (0.6% on first $7,000)	$42	0.07%
SUTA (3.0% on first $42,000)	$1,260	2.02%
Workers comp (12%)	$7,488	12.00%
Health insurance ($500/mo)	$6,000	9.62%
PTO + holidays (128 hrs)	$3,840	6.15%
Training, safety, PPE	$1,000	1.60%
Total burden	$24,404	39.1%

Fully burdened annual cost: $86,804 Fully burdened hourly rate: $41.73/hr

That $30/hr carpenter really costs you $41.73/hr. If you’re billing him out at $45/hr thinking you have a $15 margin, your actual margin is $3.27. That’s razor thin, and it doesn’t include a penny of overhead or profit.

Worked Example #2: General Laborer at $22/hr

Now let’s look at a lower-wage employee. Same benefits structure, different base rate.

Base annual wage: $45,760

Burden Component	Annual Cost	% of Base
FICA (7.65%)	$3,501	7.65%
FUTA (0.6% on first $7,000)	$42	0.09%
SUTA (3.0% on first $42,000)	$1,260	2.75%
Workers comp (7% for general labor)	$3,203	7.00%
Health insurance ($500/mo)	$6,000	13.11%
PTO + holidays (128 hrs)	$2,816	6.15%
Training, safety, PPE	$800	1.75%
Total burden	$17,622	38.5%

Fully burdened annual cost: $63,382 Fully burdened hourly rate: $30.47/hr

Notice something? The burden PERCENTAGE is almost the same (38.5% vs 39.1%), but the health insurance component jumps to 13.11% of base wages. That’s because health insurance is a fixed dollar cost, not a percentage. The lower the base wage, the higher the percentage burden from benefits.

This is why labor burden hits harder on your lower-paid workers.

How Workers Comp Rates Change Everything by State

Workers comp is state-regulated, and rates vary dramatically. Here’s what carpentry (class code 5403) looks like across different states per $100 of payroll:

State	Rate per $100	Burden % on $30/hr
California	$14.00 - $18.00	14% - 18%
New York	$12.00 - $16.00	12% - 16%
Florida	$7.00 - $10.00	7% - 10%
Texas	$6.00 - $9.00	6% - 9%
Washington	$10.00 - $14.00	10% - 14%
Ohio (state fund)	$8.00 - $12.00	8% - 12%

Source: NCCI, state workers compensation insurance bureaus, 2025-2026 rate filings.

A carpenter in California with a clean EMR might pay $15 per $100 of payroll for workers comp. That same carpenter doing the same work in Texas might pay $7. That difference alone swings your labor burden by 8 percentage points.

Regional pricing disclaimer: All rates in this article reflect national ranges as of 2026. Costs vary by location, trade classification, and individual company factors like your EMR and benefit structure. Get quotes from your insurance broker for accurate numbers.

Five Mistakes That Blow Up Your Labor Numbers

1. Using base wage as your billing rate. I’ve said it already but it bears repeating. If you pay $30 and charge $35, you’re losing money every hour your employee works. You need base wage + burden + overhead + profit. Period.

2. Forgetting overtime burden. When your carpenter works 50 hours in a week, those 10 overtime hours cost $45/hr in wages - but the burden on overtime is HIGHER per hour because workers comp and FICA still apply to the overtime premium. A lot of estimating spreadsheets miss this.

3. Using last year’s workers comp rate. Your EMR changes annually based on claims history. One bad claim can spike your rate for three years. I check mine every renewal and adjust my estimates accordingly.

4. Treating subs like employees without the burden. If you’re paying 1099 workers but controlling their schedule and tools, you could face misclassification penalties. The IRS doesn’t care what you call them. They care about the working relationship.

5. Not updating for state law changes. Paid sick leave mandates have rolled out across a dozen states since 2020. If you’re in a state that now requires paid sick time and you’re not accounting for it, that’s money walking out the door.

How to Use Your Burdened Rate in Estimates

Once you know your true burdened rate, every estimate gets more accurate:

1. Calculate productive hours per year. Start with 2,080 (40 hrs x 52 weeks). Subtract PTO, holidays, sick days, training days, and weather days. For construction, I typically use 1,800-1,900 productive hours as a realistic number.

2. Divide your total annual cost by productive hours. This gives you the cost per productive hour, which is always higher than the burdened hourly rate because you’re spreading the same cost over fewer hours.

3. Add your overhead allocation per hour. Truck, tools, office, insurance, phone, admin staff - divide your annual overhead by total productive crew hours.

4. Add your profit margin. This is what’s left after all costs. Target 10-20% net profit.

For our $30/hr carpenter:

• Total annual cost: $86,804
• Productive hours: 1,850
• Cost per productive hour: $46.92
• Overhead allocation ($15/hr): $61.92
• Plus 15% profit: $71.21/hr billing rate

That’s the number that goes on the estimate. Not $45. Not $50. $71.

If that number surprises you, check out our Contractor Overhead Calculator to see where the overhead is coming from.

The Subcontractor Alternative

If the burden math makes you want to go all-1099 subs, I get it. But know the tradeoffs:

With employees: You control quality, schedule, and work methods. Higher cost but more consistency. You build a team.

With subcontractractors: Lower burden (no payroll taxes, no workers comp, no benefits from your side). But subs charge their OWN burden into their rates. A $30/hr carpenter might charge you $55-$65/hr as a sub because they’re covering their own taxes, insurance, and profit.

The math often works out similar. What changes is risk, control, and scalability. Most residential remodelers I know, myself included, use a mix. Keep your core crew as W-2 employees and sub out specialty work.

Frequently Asked Questions

What is a good labor burden rate for construction?

A typical labor burden rate for construction companies falls between 30% and 45% of base wages. Companies offering minimal benefits land closer to 20-25%. Those with full health, retirement, and generous PTO can hit 50% or higher. According to the National Association of Home Builders (NAHB), the average for residential construction firms is roughly 35-40%.

How do I calculate my burdened labor rate?

Add all employer-paid costs (FICA, unemployment taxes, workers comp, health insurance, PTO, training) and divide by base wages. For a quick version: Base Hourly Rate x (1 + Burden Percentage) = Burdened Rate. A $25/hr worker with 35% burden costs $33.75/hr.

Does labor burden include overhead?

No. Labor burden covers only the costs directly tied to employing a person: payroll taxes, workers comp, benefits, and paid time off. Overhead costs like rent, vehicles, tools, office staff, and insurance are separate. Your billing rate needs to cover base wage + burden + overhead + profit. Use our Contractor Markup Calculator to get the full picture.

What’s the difference between labor burden and labor cost?

Labor cost is the total you spend on a worker (wages + burden). Labor burden is just the extra costs on top of wages. If someone earns $25/hr base and your burden adds $9/hr, the labor burden is $9/hr (or 36%) and the total labor cost is $34/hr.

Is workers comp part of labor burden?

Yes. Workers compensation insurance is typically the largest single component of labor burden in construction, ranging from 5% to 30% of payroll depending on the trade classification, state, and your company’s experience modification rate (EMR). High-risk trades like roofing pay significantly more than low-risk trades like electrical work.

Stop Guessing, Start Calculating

Every dollar you miss in labor burden comes straight out of your profit. On a crew of four running 2,000 hours each per year, even a 5% error in burden adds up to over $12,000 in unrecovered costs.

Contractors on Capterra rate EstimationPro 4.8/5 for accuracy and time savings. Try EstimationPro free - it builds your burdened labor rate into every estimate automatically, sends polished proposals, and follows up with homeowners so you win more of the bids you already send. No more spreadsheet math. No more leaving money on the table.