Contractor Labor Burden Calculator
Find what an employee really costs per productive hour, including employer payroll taxes, insurance, benefits, and paid non-job time.
This is employee cost before business overhead and profit. Use it in your estimate, then price the job.
Calculate the cost behind the wage
A $28 wage is not a $28 labor cost. Paid leave, employer taxes, insurance, benefits, and time away from billable work still need to be covered. This calculator divides the annual employer cost by the hours the employee actually spends producing job work.
Use your own payroll records and policy costs. The default percentage is an illustrative input, not a recommended tax rate. Enter employer contributions only; employee deductions are not an extra employer expense.
The labor burden formula, with numbers
Annual wages equal hourly wage multiplied by paid hours. Add employer payroll taxes on those wages, annual insurance, and annual benefits. Divide that total by productive hours.
At $28 for 2,080 paid hours, wages are $58,240. Illustrative employer taxes of 10% add $5,824. Add $4,200 insurance and $6,000 benefits: annual cost is $74,264. Spread over 1,600 productive hours, that is $46.42 per hour.
Avoid counting the same cost twice
Paid leave is already included in paid hours; reduce productive hours to reflect time off rather than adding those wages again as benefits. Do not also carry the same workers’ compensation policy in a separate job-cost line.
This result is employee cost. Office costs, vehicles, estimating time, and the profit you want still need an explicit place in your pricing. Pair the result with the hourly-rate and markup tools when building your bid.
Questions
Is this my selling rate?+
No. This is the cost of employing someone per productive hour. Business overhead and profit come next.
What if productive hours are zero?+
No hourly cost can be calculated. Enter a positive number no higher than annual paid hours.
Put the numbers to work
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