Labor Burden Calculator
Add 2026 payroll taxes, insurance, and benefits to a wage to get the true cost of each hour your crew can bill.
Federal payroll taxes (2026)
- Social Security
- 6.2% to $184,500.00
- SSA 2026 contribution and benefit base; IRS Publication 15 (2026)
- Medicare
- 1.45%
- IRS Publication 15 (2026). No wage base for the employer share.
- FUTA
- 0.6% to $7,000.00
- IRS Publication 15 (2026): 6.0% less the 5.4% state credit. Credit reduction states pay more (DOL).
Annual cost by component
- Base wages$62,400.00
- Social Security$3,868.80
- Medicare$904.80
- FUTA$42.00
- SUTA$189.00
- Workers' comp$4,992.00
- General liability$936.00
- Health insurance$7,200.00
- Retirement match$1,872.00
- Other$1,000.00
Assumptions
Federal rates are for tax year 2026, with the source for each above. Other defaults are examples. Edit them for your state, trade, and policies. Amounts are in US dollars.
Use it when you set labor rates for the year or check an estimate. Updated October 2026. Results are estimates, not financial, legal, lending, or tax advice. See all free contractor tools.
What is labor burden?
Labor burden is what an employee costs above the wage: payroll taxes, workers' comp, liability insurance, health insurance, and retirement. The burden rate is that cost as a percent of wages. In the example above, a carpenter paid $30.00 an hour costs the company $40.10 for every paid hour.
The formula, with the example values
| 1 | Total annual costWages + taxes, insurance, and benefits | $62,400.00 + $21,004.60 =$83,404.60 |
|---|---|---|
| 2 | True cost per productive hourTotal annual cost ÷ (paid hours − non-productive hours) | $83,404.60 ÷ 1,780 =$46.86 |
| 3 | Billing rateTrue cost × (1 + markup) | $46.86 × 1.25 =$58.58/hr |
Why productive hours matter
You pay for about 2,080 hours a year, but a crew member works on jobs for fewer. PTO, holidays, training, and drive time are paid and not billable. Divide the full annual cost by productive hours to get the rate each estimate must cover.
When to use it
Run it for each pay level when you set labor rates for the year, when a policy renews, and when your state sends a new SUTA rate. Use the result as the labor cost in estimates and as the hourly rate on time and materials work. Bill that rate with the cost-plus invoice template.
Common mistakes
Markup on the base wage alone can lose the whole profit to burden. Dividing by paid hours makes labor look cheaper than it is. A flat 7.65% for FICA overstates the tax on wages above the Social Security wage base. An old workers' comp rate is the most common stale number.
What this does not include
Overtime premiums, union fringe contributions, vehicles, and office overhead are not in the default rows. Add a per-employee amount for them in Other, or cover them in your markup. Job-site costs such as fuel belong on the job as expenses. Buildplus expense tracking classifies each one to its job and puts it on the open cost-plus invoice.
Before Buildplus I would have to send my subcontractors multiple payments spread out over a couple of days to avoid hitting electronic transfer limits.
Now I can send one payment and be done. That convenience combined with the fact that payments are automatically tracked back to the right subcontract makes Buildplus a very elegant solution.
Cliff Kahan
Property Projects LLCFAQs
What is a labor burden rate?
The labor burden rate is the cost of an employee above the wage, divided by the wage. With $62,400.00 in wages and $21,004.60 in payroll taxes, insurance, and benefits, the burden rate is 33.7%.
What is a typical labor burden rate in construction?
It changes a lot by trade and state. Workers' comp and health insurance cause most of the difference, and trades with high comp rates, such as roofing, run higher. Use your own policy rates for a number you can price with.
Why use productive hours and not paid hours?
You pay for PTO, holidays, training, and drive time, but you cannot bill a client for them. The calculator divides the full annual cost by productive hours, so those paid hours are recovered in the rate for the hours you do bill.
Which payroll tax rates does the calculator use for 2026?
Social Security is 6.2% on wages up to $184,500.00 (SSA). Medicare is 1.45% on all wages. FUTA is 0.6% on the first $7,000.00 after the full state credit (IRS Publication 15). The 0.9% Additional Medicare Tax is withheld from the employee only, so it is not part of the employer burden. SUTA is set by your state.
How do I find my workers' comp rate?
Your policy or your carrier lists a rate per $100 of payroll for each class code. Rates depend on your state, trade, and claims history. A rate of $8 per $100 adds 8% of wages to the cost of labor.
How do I set a billing rate from labor burden?
Multiply the true cost per productive hour by one plus your markup. A $46.86 true cost with a 25% markup gives a $58.58 billing rate. Check that the margin this markup gives covers overhead and profit.
What is Buildplus?
Buildplus is the payments, expenses and invoicing platform built for contractors running cost-plus jobs. Every payment, swipe and reimbursable expense stays tied to the project it belongs to.
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