Labor Burden Calculator
Nobody costs what their wage says. By the time FICA, unemployment tax, workers' compensation, liability, benefits and unbilled hours are on top, the hour you sell and the hour you pay for are two different numbers. What you need in an estimate is the true hourly cost of an employee, not the wage.
This labor burden calculator builds the full employer cost for one employee, then divides it by the hours you can actually bill, so you carry a burdened hourly rate into estimates instead of a wage. For early feasibility numbers before a takeoff exists, the construction cost estimator does that job. Run it per employee; the gap widens as the wage rises, because taxes and comp scale with payroll.
What sits on top of the wage
- Employer FICA, 7.65%6.2% Social Security to the 2026 wage base, 1.45% Medicare uncapped
- FUTA6.0% on the first $7,000, less the 5.4% credit
- SUTAYour state rate and wage base, experience-rated
- Workers' compensationYour class code rate and experience modification rate
- General liabilityOften rated on payroll as well
- Benefits and PTOHealth, retirement, holidays, vacation
- Unbilled hoursShop time, drive time, rain days, warranty callbacks
Labor burden is an output, not an input. It falls out of your own payroll tax rates, your own comp class code and mod, and the hours your crew genuinely bills, which is why a borrowed percentage will mis-price your bid.
What one employee costs you per billable hour
Enter the wage, your own tax and insurance rates and the hours you expect to bill. The calculator returns fully burdened hourly cost, the burden in dollars, and the labor burden rate as a percentage of wages.
Three things that decide the real number
The arithmetic is straightforward. What separates a burdened rate you can bid against from one that quietly loses money is which rates you use and which hours you divide by. Payroll burden is the employer payroll taxes and insurance layer; benefits and unbilled time sit on top of it.
Use your rates, not averages
SUTA is experience-rated and the taxable wage base differs by state, so two identical payrolls are taxed differently. Workers' compensation depends on class code, state and your experience modification rate. Pull both off your own declarations page and rate notice rather than a national figure, which does not exist in any credible form.
Divide by billable hours
You pay for 2,080 hours a year and you bill considerably fewer. PTO, holidays, shop time, drive time, weather days and warranty callbacks all shrink the denominator while the cost stays put. Dividing total annual cost by paid hours instead of billable hours is the single most common way this calculation comes out too low.
Run it per employee
A company-wide burden percentage hides the spread. Social Security stops at the annual wage base while Medicare does not, comp premium scales with payroll, and benefit costs are often flat per head rather than proportional. Your foreman and your first-year helper carry genuinely different burden percentages on the same crew.
The gap between wage and cost, measured
The Bureau of Labor Statistics prices employer compensation per hour worked, which is the same basis a burdened rate uses. These are the construction-industry figures from the June 2026 release.
$51.96
Employer cost per hour worked for construction workers in private industry, June 2026, against $36.13 per hour in wages and salaries. The difference is not optional spending; it is the tax, insurance and benefit cost of employing somebody.
$15.84
Employer benefit cost per hour worked in construction, which is 30.5% of total compensation and roughly 43.8% on top of wages before a single unbilled hour is counted. Legally required benefits, insurance and paid leave all sit inside it.
$2.63
Employer cost per hour worked for paid leave alone in construction. You are paying for vacation, holidays and sick time on every hour the crew is on a job, which is the cost most contractors leave out of the hourly rate entirely.
These are national industry averages across every construction employer, union and non-union, from one-truck operations to national contractors. They are a sanity check on your own result, never a substitute for it. A burdened rate built from someone else's tax rates and someone else's benefit package will be wrong in your market, and the direction of the error is unpredictable.
- BLS, Employer Costs for Employee Compensation, Table 4 — construction: total compensation $51.96, wages and salaries $36.13, total benefits $15.84, paid leave $2.63, all per hour worked, June 2026.
- IRS Tax Topic 751, Social Security and Medicare Withholding Rates — employer Social Security 6.2% to a 2026 wage base of $184,500, Medicare 1.45% uncapped, Additional Medicare 0.9% on wages over $200,000.
- IRS, FUTA Credit Reduction — FUTA 6.0% on the first $7,000 of wages, standard credit 5.4%, net rate 0.6%; credit reductions accrue at 0.3% per year a state loan stays unpaid.
- Florida Department of Revenue, Reemployment Tax Rate Information — initial rate 2.7% for the first 10 quarters, 2026 range 0.1% to 5.4%, taxable wage base $7,000.
Figures checked 11 September 2026. We publish no national average workers' compensation rate for any trade, because rates are filed state by state and no credible national figure exists. The calculator asks for the rate on your own policy instead.
Labor burden questions, answered
How much does a $25 an hour employee actually cost me?
Considerably more than $25, and the only honest answer comes from your own rates. Add employer FICA at 7.65%, FUTA, your state unemployment rate, workers' compensation at your class code, liability, benefits, and then spread the total over billable rather than paid hours. For scale, BLS put construction benefits at $15.84 per hour worked against $36.13 in wages in June 2026.
What should my labor burden percentage be?
There is no correct national percentage, because burden is an output rather than an input. It moves with your state unemployment rate, your comp class code and experience modification rate, your benefit package and how much paid time off you carry. Anyone quoting a single figure for all contractors is quoting a number that cannot survive a change of state or a change of trade.
What is FUTA and why might I pay more than 0.6%?
FUTA is 6.0% on the first $7,000 of each employee's wages, offset by a credit of up to 5.4% for paying state unemployment on time, which leaves most employers at a net 0.6%. If your state borrowed from the federal unemployment fund and has not repaid, that credit is reduced by 0.3% for each year the loan stays outstanding, and your effective rate rises accordingly. You report FUTA annually on Form 940, and IRS Publication 15 sets the deposit rules.
Why is my state unemployment rate different from a contractor one state over?
Because SUTA is experience-rated and both the rate schedule and the taxable wage base are set state by state. Florida, for example, starts new employers at 2.7% on the first $7,000 for their first ten reported quarters, with 2026 rates running from 0.1% to 5.4%. Several states assign construction employers an industry rate rather than the general new-employer rate.
Why is my workers' compensation higher than another carpenter's?
Different class code, different state and a different experience modification rate. Premium is the rate per $100 of payroll applied to your payroll, adjusted by your experience rating. NCCI calculates that modification rate in most states from roughly three years of claims history, which decides whether it sits above or below 1.00. Rates are filed with each state, so take the number off your own declarations page rather than any published average.
Do I count vacation, holidays and drive time in the burden?
Yes, and skipping it is the step that breaks most burden calculations. You pay for roughly 2,080 hours and bill far fewer, so total annual cost has to be divided by billable hours per employee, taken from timesheets rather than assumed. BLS measured construction employers spending $2.63 per hour worked on paid leave alone in June 2026, and that is before shop time, drive time and weather days.
A real burdened rate raises your price floor
Which is only a problem if the jobs coming in cannot carry it. The fix is not a thinner margin, it is a better mix of work reaching you in the first place.
Zainfy builds the search and ad systems that keep remodeling and construction contractors booked, for contractors anywhere in the USA.
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Zayn founded Zainfy in 2023 and has spent six years in performance marketing for home remodeling and construction companies across the United States. He built this tool set because the contractors he works with were losing more money to pricing math than to any advertising decision.
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