What counts as labor burden
Anything you pay because a technician works for you, other than the wage itself. Typical items are employer payroll taxes, workers' compensation and liability insurance, health and other benefits, paid time off, the vehicle and fuel, tools and equipment, and training. Which items apply depends on how the person is employed and where you operate.
How to calculate it
Add up a year of those non-wage costs for a technician, then divide by that technician's annual wages:
Labor burden % = annual non-wage employment costs ÷ annual wages × 100
Example
Illustrative numbers only. A technician earns $30 an hour. Taxes, insurance, benefits, vehicle and tools add up to $9 for every hour paid. The burden is $9 ÷ $30 = 30%, so each paid hour costs $39 before any share of office overhead.
Why it matters
A price built from the wage alone leaves the burden, and everything after it, to come out of your profit. Labor burden is the first layer of a technician's fully-loaded cost, which is the floor a price must clear. Because technicians are not billable every paid hour, the cost of each billable hour is higher still: see billable hours.
Related
- Technician true cost calculator
- Billable hourly rate calculator
- How to price service jobs profitably
- Field service pricing FAQ
Definitions here are general and educational. Exact meanings can vary by trade, region, and software.