Construction Labor Burden: How to Calculate True Employee Costs

Labor burden is the total cost of an employee beyond their base hourly wage. In construction, where labor typically represents 30-50% of project cost, miscalculating burden can destroy margins.

What Is Labor Burden?

Labor burden includes all costs incurred by the employer for each hour worked:

• Payroll taxes — FICA (Social Security + Medicare), FUTA, SUTA
• Insurance — Workers compensation, general liability, disability
• Benefits — Health insurance, retirement, paid time off, training
• Compliance — OSHA training, drug testing, continuing education

Calculating the Burden Rate

Step 1: Annual Base Cost

$30/hour × 2,080 hours/year = $62,400

Step 2: Add Burden Costs

Step 3: Effective Hourly Rate

Calculate total annual cost after productive hours.

Most tradespeople work approximately 1,850 productive hours per year (accounting for PTO, holidays, weather delays).

($62,400 + $22,630) ÷ 1,850 hours = $45.96/hour

The burdened rate is 53% higher than the base wage.

Regional Variations

Labor burden varies significantly by state and trade:

Prevailing Wage vs. Open Shop

For public works projects, Davis-Bacon prevailing wages add another layer:

• Base rate is set by DOL for each trade and county
• Fringe benefits (health, pension, training) are paid as wage equivalents or bona fide contributions
• Apprentice ratios must be strictly tracked

Accurate labor burden calculations are critical for profitable bidding. F&K Estimatings maintains current labor burden databases for all 50 states. Contact us for audit-ready bid support.