Labor Burden
The total cost of an employee beyond base wages — taxes, insurance, benefits, and other employer costs — expressed as a percentage of wages.
Definition
Labor burden is the total cost of an employee to the contractor beyond their base hourly wage. It includes payroll taxes (FICA, FUTA, SUTA), workers compensation insurance, general liability allocation, health insurance, retirement contributions, vacation and holiday pay, and other employer-borne costs. Burden is typically expressed as a percentage of base wages.
A wage of $32 per hour with a 35 percent burden produces a fully burdened labor cost of $43.20 per hour — and that is the number an estimator should be using to price labor in the bid.
How labor burden is used in estimating
Every labor line in an estimate should be priced at the fully burdened rate, not the base wage. Estimators who use base wages alone will dramatically underbid the labor portion of the work and lose money on every hour spent. Burden rates vary widely by trade, by state, by union vs. nonunion, and by company benefit structure — a heavy-civil contractor in California with strong benefits and high workers comp may carry 60 percent burden, while a light commercial GC in Texas may carry 30 percent.
Burden rate calculation is a formal exercise. The estimator (or accounting team) totals all employer-side labor costs for the year, divides by total productive labor hours, and produces a burden percentage that gets applied to every wage in the estimate. Burden should be reviewed and updated annually, because rate changes in workers comp, health insurance, and tax bases shift the number meaningfully year over year.
Calculating labor burden
Sum all employer-paid labor costs for the year — FICA match, FUTA, SUTA, workers comp premium, general liability allocation, health insurance, retirement match, paid vacation and holidays, training, and small tools. Divide by total productive (billable) hours. The resulting percentage is the burden rate. Apply this rate to base wages on every labor line in your estimate. Update annually, and use trade-specific burden rates if your firm spans union and nonunion work or multiple states.
Frequently asked questions
Q.What is a typical labor burden percentage?
30 to 50 percent of base wages is a common range in nonunion private commercial construction. Union work, heavy civil, and high workers-comp trades can push burden to 60 to 80 percent or more.
Q.What is included in labor burden?
Payroll taxes (FICA, FUTA, SUTA), workers compensation, employer health insurance, retirement match, paid time off, holiday pay, training time, and small tools. Some contractors include general liability allocation; others put GL in overhead.
Q.How often should burden rate be updated?
At least annually. Workers comp rates, health insurance premiums, and tax wage bases change every year. Estimators using a stale burden rate are systematically underpricing or overpricing labor.
Q.Is labor burden the same as overhead?
No. Labor burden is the cost of employing a worker. Overhead is the cost of running the company (office, leadership, BD, software). Both load onto the bid, but they are calculated and applied separately.
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