1. What Is Labor Burden?

Labor burden represents the additional costs associated with employees beyond their direct wages. For contractors, this includes expenses like payroll taxes, insurance, benefits, and other indirect labor costs.

2. How To Calculate Labor Burden

The calculator uses the labor burden formula:

Where:

• \( Indirect\ Costs \) — All non-wage labor expenses (taxes, insurance, benefits, etc.)
• \( Direct\ Labor \) — Actual wages paid to employees

Explanation: The result shows how much additional cost is incurred for every dollar of direct labor paid.

3. Importance of Labor Burden Calculation

Details: Understanding labor burden helps contractors accurately price jobs, manage profitability, and make informed hiring decisions. It reveals the true cost of labor beyond just hourly wages.

4. Using the Calculator

Tips: Enter all indirect labor costs and total direct labor costs in dollars. The calculator will determine your labor burden ratio.

5. Frequently Asked Questions (FAQ)

Q1: What's included in indirect costs?
A: Payroll taxes, workers' compensation, health insurance, retirement contributions, training, uniforms, and other employee-related expenses.

Q2: What's a typical labor burden for contractors?
A: Typically ranges from 20-50% of direct labor costs, but varies by location, trade, and benefits offered.

Q3: Why is this important for bidding jobs?
A: Underestimating labor burden leads to underpricing jobs and reduced profitability. It must be factored into labor rates.

Q4: How often should I calculate labor burden?
A: At least annually, or whenever significant changes occur in labor costs, benefits, or tax rates.

Q5: Does this include equipment or overhead costs?
A: No, this calculation focuses specifically on labor-related costs. Equipment and overhead are separate calculations.