Glossary
Labor burden
Also called: burden rate · loaded labor rate · fully burdened cost
Labor burden is everything an employee costs you on top of their wage — payroll taxes, workers compensation, unemployment insurance and benefits.
A technician on $28 an hour does not cost $28 an hour. On top of the wage sits the employer half of FICA, federal and state unemployment, workers compensation at whatever rate your trade classification and claims history earn, and any contribution you make to health cover or retirement. In the home service trades that stack commonly lands somewhere between 25 and 45 percent on top of the wage.
The burdened rate is still not what an hour of work costs you, because you pay for hours you cannot bill. Drive time, the supply house, shop time, training, warranty callbacks and the afternoon the schedule collapsed are all paid and none of them are invoiced. Dividing the fully burdened annual cost by billable hours rather than paid hours gives the number that belongs in a price.
Contractors who price against the wage rather than the burdened, non-billable-adjusted rate underprice every job by the same proportion, which is why the error is invisible until a year ends lower than expected.
Why it matters to a contractor
It is the floor under every price you set. A quote built on the wage is built on a number that is forty to seventy percent too low, and because the mistake repeats on every job it compounds quietly rather than showing up as a single bad month.
Work it out on your numbers
See also