Labor Burden
What is Labor Burden?
Labor burden is the full cost of employing a worker on top of their base wage — payroll taxes, workers' compensation, health and other benefits, paid time off, training, uniforms, and any required insurance. It is what an hour of that worker actually costs you, not what lands in their paycheck. A labor burden rate expresses it as burden ÷ base wages, or as a fully burdened hourly cost = base wage per hour + burden per hour. Pricing off the bare wage understates job cost every time, because the burden is real money the business pays whether or not it shows on the timesheet.
The wage on the offer letter is only part of what an employee costs. Add the employer’s payroll taxes, workers’ comp premiums, any benefits, and the paid hours when no work is billed — holidays, training, sick time — and the true hourly cost climbs well above the stated wage. That gap is the burden, and ignoring it is one of the most common reasons jobs that look profitable on paper are not.
Burden matters most when you price labor. If your hourly rate is built on the raw wage, every billed hour quietly under-recovers the taxes and benefits attached to it. Build pricing on the fully burdened cost instead, so the rate covers what the hour genuinely costs before any margin is added.
Burden is distinct from overhead: burden attaches to a specific worker’s time, while overhead is the business-wide indirect cost. Both belong in a sound rate. Compute a worker’s true hourly cost with the labor burden rate calculator.