Labor burden is what a field employee costs you on top of the pay for the hours they actually work: the payroll taxes you pay as their employer, workers' comp, the insurance and benefits you pay for them, and their paid days off. To put it on an hour, add up a year of those costs and divide by a year of wages for hours worked: that's your burden rate. Add 1 and you have the multiplier that turns a wage into what an hour of work costs you.
In the example below, a $30-an-hour carpenter costs you $39.14 for every hour they work, and $42.62 for every hour that lands on a job. Here's how to get your own numbers.
What counts as labor burden, and what doesn't
The National Association of Home Builders' chart of accounts gives labor burden its own account, and for a field crew it holds:
- Payroll taxes you pay as the employer — your 6.2% Social Security and 1.45% Medicare, federal unemployment (FUTA), your state's unemployment tax, and any other tax your state or city charges employers on wages.
- Workers' comp insurance.
- Insurance and benefits you pay for them — NAHB names health, life and disability insurance, and a retirement match you pay belongs here too. Count only your share: what you take out of their check for the health plan is part of their wage.
- Paid days off — holidays, vacation, sick days. You pay for them and get no work back.
What isn't burden: the worker's own share of payroll taxes. The 7.65% you withhold from their check comes out of the wage you've already counted. Of the FICA, only your matching 7.65% is burden.
Trucks, tools, the shop and the office aren't burden either. NAHB keeps them in other accounts: trucks, the shop and small tools with indirect construction costs (a tool used up on one job can go straight to that job), and the office with general and administrative costs. General liability insurance isn't burden in NAHB's chart either; it's booked with the office.
The formula
- Burden rate = a year of burden ÷ a year of wages for hours worked
- Multiplier = 1 + burden rate
- Burdened hourly rate = wage × multiplier
A 30% burden is a 1.30 multiplier: a $30 hour costs you $39.
Watch the bottom of the first line. If paid days off are in your burden — and they should be — divide by the wages for hours worked, not total pay. Holiday pay is already part of total pay, so dividing by it puts the holidays in the top and the bottom of the fraction, and the rate comes out low. The example below shows by how much.
Use a whole year, not one paycheck. FUTA is charged only on each worker's first $7,000 of the year, and your state's unemployment tax stops at a cap of its own, so January's checks carry tax that October's don't.
You'll also hear the result called the fully burdened rate. Ask what's in someone's number before you compare it with yours. In government contract pricing, for one, the fully burdened rate stacks overhead and office costs on the burden, and the hourly rate billed adds profit too. Neither is the number here.
A worked year for one carpenter
Say you pay a carpenter $30 an hour, 40 hours a week, all year: 2,080 paid hours and $62,400. Fifteen days of that are holidays, vacation and sick days — 120 hours — so they're at work for 1,960 hours, worth $58,800 in wages. The tax rates are the 2026 federal ones; the state unemployment, comp and health figures are made up for the example, so put in yours.
| Line | Per year |
|---|---|
| Social Security, 6.2% of $62,400 | $3,868.80 |
| Medicare, 1.45% of $62,400 | $904.80 |
| Federal unemployment, 0.6% of the first $7,000 | $42.00 |
| State unemployment, say 3% of the first $10,000 | $300.00 |
| Workers' comp, say $8 per $100 of payroll | $4,992.00 |
| Your share of health insurance, say $350 a month | $4,200.00 |
| Paid days off, 120 h × $30 | $3,600.00 |
| Labor burden | $17,907.60 |
$17,907.60 ÷ $58,800 = 30.46%, a multiplier of 1.3046. Every hour this carpenter works costs you $39.14, not $30. Check it the long way: $62,400 in pay plus $14,307.60 in taxes, comp and insurance is $76,707.60 a year, and $76,707.60 ÷ 1,960 hours is $39.14.
If the multiplier goes somewhere that takes two decimals, round it up: 1.31 prices the hour at $39.30. Round it down to 1.30 and the hour is $39.00, and those 14 cents come to $267.60 a year that no job carries.
A few notes on the federal lines. Social Security's 6.2% stops at $184,500 of a worker's pay in 2026, which this carpenter's pay won't come near; Medicare's 1.45% has no cap. FUTA is 6.0% of the first $7,000, less a credit of up to 5.4% for paying your state unemployment on time, so 0.6% — more if your state is a credit reduction state that year.
Now divide the same $17,907.60 by the whole $62,400 instead and you get 28.70%, a $38.61 hour. About 53 cents an hour doesn't sound like much. Across 1,960 hours it's $1,033.13 a year of this one carpenter's cost that no job ever carries.
Which hours you divide by
The 1,960 hours are hours at work, and not all of them land on a job. Loading the truck at the shop on Monday, the drive between two houses, the rainy morning everyone waited out at the shop: you paid for every one of those hours, and no one job can fairly carry them. (If they sat out the rain at one house, that's that job's cost. Charge it there.)
Strictly, they aren't burden. NAHB's chart books wages that can't be charged to a specific job as an indirect construction cost, and tells you to charge labor to a job wherever you can. But if your rate doesn't carry those hours and nothing else does, no job pays for them.
Say 160 of the carpenter's 1,960 hours are like that, leaving 1,800 on jobs. You have two ways to carry them:
- Keep the $39.14 hour, and carry the 160 hours — $6,261.84 a year at the burdened rate — in your indirect costs, with the trucks and the shop.
- Or spread the whole $76,707.60 over the 1,800 job hours: $42.62 an hour, a multiplier of 1.4205 on the $30 wage, or 1.43 rounded up.
Pick one. Do both and you count those hours twice; do neither and they vanish.
Workers' comp is the line you have to look up
Social Security and Medicare come out the same for every employer at the same wage, FUTA nearly so, and your state sets your unemployment rate. Vacation and health insurance are mostly your call, though some states require paid sick leave, and the federal health-coverage rules reach employers with 50 or more full-time employees, part-timers counted toward that. Workers' comp is the one you have to go and find out.
In most states comp is priced per $100 of payroll, and the rate depends on the kind of work. Each worker's pay goes in a class — roofing is one, residential carpentry another — and every class has its own rate. In Texas, for example, each class has a published loss cost, an insurer usually multiplies it by a factor it files with the state, and an experience modifier built on your own claims history can move the premium again. Washington is the odd one: most of its comp is charged by the hour worked, and the worker pays part of the premium out of their check. Only your part is burden. The details differ by state.
So the $8 in the example is made up, and your real rate could be well under it or well over it. It's also why burden belongs to the worker, not the company: a roofer and a trim carpenter on the same wage can cost you different amounts. Ask your agent for each class rate and your experience mod; your payroll provider or CPA has your exact tax rates.
Put the number to work
Cost your own crew's work at the burdened hour, never the wage. At $30 instead of $39.14, the crew labor in every scope comes out 23% under what it cost, and that's how doing it yourself starts to look cheaper than subbing it out. Job costing for crews that self-perform goes through why that matters.
Then budget crew hours like any other cost. They're a line in a flip budget the same as lumber is, at the loaded rate.
On the Crew plan, Firmabuilt keeps two numbers on each worker: an hourly rate and a burden multiplier. You type both — it doesn't work out your burden for you, and the multiplier starts at 1.0, which costs labor at the raw wage. When a worker clocks in on a task, the shift keeps a copy of both; when they clock out, the hours they were paid for × rate × multiplier post as a cost on that task, under its scope and cost code. A raise or a new multiplier applies to new shifts; it never reprices one already on the books.
Questions
Is labor burden part of overhead?
Not for your field crew. Burden goes wherever the wages it rides on go. NAHB's chart of accounts books a field crew's burden as a construction cost, right next to their wages, and keeps trucks, the shop, the office and general liability insurance in other accounts. A superintendent's payroll taxes and benefits land in indirect cost because their salary does. Tax rules sort some of these lines differently, so ask your CPA how your books should carry them.
Is the employee's share of FICA part of labor burden?
No. The 6.2% Social Security and 1.45% Medicare you withhold from a worker's check are their taxes, paid out of the wage you've already counted. Your burden is the matching 6.2% and 1.45% you pay on top of it.
What's a normal labor burden percentage?
There isn't one worth copying. It turns on your state's unemployment rate, your comp classes and claims history, and what you pay in benefits and time off, some of which your state may require, so two builders paying the same wage can be far apart. Work out yours from last year's payroll and this year's rates.
How often should you recalculate labor burden?
Every January, when the year's new tax rates and wage bases take effect, and whenever your comp policy renews or your health plan's price changes. Redo it after a raise too: Social Security, Medicare, comp and the paid days off rise with the wage, but the capped unemployment taxes and a flat health premium don't, so the multiplier usually drops a little.