Labor burden is the full cost of employing someone, above and beyond the wage on their paycheck. When you pay a technician $30 an hour, that $30 is only part of what they actually cost you. On top of it sit payroll taxes, insurance, benefits, paid time off, the truck they drive, the fuel and tools they use, and a share of the software and training your business pays for. Add all of that up and you get the technician's fully-loaded cost — the number you must know before you can price a job for profit.
Most owners underprice because they estimate against the bare wage and quietly absorb everything else. This guide shows you exactly what goes into burden, how to add it up, and how to convert a wage into a real cost per hour you can trust.
What labor burden is (the short answer)
Labor burden is every employment cost beyond gross wages. It is usually expressed two ways:
- As a burden rate — a percentage of the wage (for example, "our burden runs about 35%").
- As a fully-loaded cost per hour — the wage plus all burden, divided by the hours the worker is actually available to bill.
Both describe the same thing. The percentage is handy for quick pricing; the dollar figure is what you build estimates on. Burden commonly lands somewhere around 25–45% of wage, but it varies widely by trade, region, and how generous your benefits are — so treat any single number as a starting point, not a rule.
How to calculate labor burden, step by step
- Start with the base wage. Use the hourly rate you actually pay, or convert a salary to an hourly figure by dividing annual salary by the paid hours in a year.
- List every additional employment cost for that worker over a year. The table below is your checklist.
- Total the annual burden — the sum of all those costs.
- Divide burden by annual wages to get the burden rate as a percentage.
- Add wages and burden, then divide by billable hours (not paid hours) to get the fully-loaded cost per hour. This last step is where most calculations go wrong — more on it below.
The components of labor burden
Not every line applies to every business, and amounts differ from shop to shop. Use this as a checklist to make sure nothing is quietly left out.
| Burden component | What it covers | Typical driver |
|---|---|---|
| Payroll taxes | Employer share of social/payroll taxes and unemployment contributions | % of wage; varies by jurisdiction |
| Workers' compensation | Insurance for on-the-job injury | Rate per $100 of payroll, by trade class |
| General liability insurance | Coverage for property damage and injury claims | Premium allocated per worker |
| Health insurance | Employer contribution to medical/dental | Per-employee monthly premium |
| Retirement contributions | Employer match or pension contribution | % of wage |
| Paid time off | Vacation, holidays, sick days — paid but not worked | Days per year |
| Vehicle | Truck or van lease/depreciation, maintenance, registration | Per-vehicle annual cost |
| Fuel | Gas or charging for the service vehicle | Miles/energy per year |
| Tools and equipment | Hand tools, power tools, meters, replacements | Annual tooling spend |
| Phone and connectivity | Mobile device and data plan | Per-worker monthly cost |
| Software and licenses | Field-service, dispatch, and back-office tools | Per-seat cost |
| Training and certification | Continuing education, licenses, safety courses | Annual per-worker cost |
Some of these are direct (a phone assigned to one technician). Others are shared overhead (liability insurance, office software) that you allocate across your field staff. Both belong in burden — the goal is to capture the total cost of putting that worker on a job.
A worked example
Take a technician paid $30/hour, working a standard 2,080 paid hours a year — roughly $62,400 in annual wages.
Now add the annual burden costs:
| Burden component | Annual cost |
|---|---|
| Payroll taxes (~8% of wage) | $4,990 |
| Workers' compensation | $3,100 |
| General liability (allocated) | $1,200 |
| Health insurance contribution | $6,000 |
| Retirement match (~3%) | $1,870 |
| Vehicle (lease, maintenance, registration) | $7,200 |
| Fuel | $3,600 |
| Tools and equipment | $1,500 |
| Phone and connectivity | $720 |
| Software and licenses | $900 |
| Training and certification | $1,000 |
| Total annual burden | $32,080 |
Burden rate = $32,080 ÷ $62,400 = about 51%.
That is higher than the rough 25–45% band, and that is exactly the point: a field technician with a truck, fuel, and tools carries far more burden than an office worker at the same wage. Your own number is the only one that matters.
Fully-loaded annual cost = $62,400 wages + $32,080 burden = $94,480.
Now the crucial step — divide by billable hours, not paid hours.
The PTO and non-billable-hours nuance
Here is where owners double-count or under-count without realizing it.
You pay for 2,080 hours, but the technician does not bill 2,080 hours. Paid time off, driving between jobs, restocking, training, callbacks, and downtime all reduce the hours you can actually put on an invoice. If PTO is a paid-but-not-worked cost, it belongs in your burden total — you are paying wages for hours no customer covers.
The mistake to avoid: do not both add PTO as a burden cost and divide by full paid hours. Pick one consistent method:
- Keep wages at the full paid figure, count PTO wages inside burden, and divide by realistic billable hours; or
- Exclude PTO hours from your hour count and don't separately add PTO wages.
Mixing the two either inflates or deflates your true cost. Consistency matters more than which method you choose.
Continuing the example: suppose realistic billable hours are 1,500 a year (after PTO, drive time, and unbillable work). Then:
Fully-loaded cost per hour = $94,480 ÷ 1,500 = about $63/hour.
That technician does not cost you $30 an hour. They cost you roughly $63 an hour to have available for billable work — and that figure is your floor before a cent of profit. You can confirm this floor and the resulting price with the labor burden calculator and the billable hourly rate calculator.
Common mistakes
- Pricing off the bare wage. The single most common way service businesses feel busy all year and still lose money.
- Dividing by paid hours instead of billable hours. Treating all 2,080 paid hours as billable makes your cost look far lower than it is.
- Double-counting PTO. Adding PTO to burden and dividing by full paid hours punishes you twice.
- Forgetting the truck. Vehicle, fuel, and tools are often the biggest field-specific burden lines — and the easiest to overlook.
- Using one burden rate for everyone. An owner, an apprentice, and a senior tech carry very different burdens; blend only if the mix is stable.
- Setting it and forgetting it. Insurance, fuel, and benefit costs drift. Revisit your burden at least once a year.
Frequently asked questions
What is a typical labor burden percentage?
For field-service roles it commonly falls somewhere around 25–45% of wage, but roles with a vehicle, fuel, and tools can run well above that — often past 50%, as the example shows. The honest answer is that it depends entirely on your benefits, insurance rates, and equipment costs, so calculate your own rather than borrowing a figure.
Should overhead like office rent go into labor burden?
Generally no — pure business overhead (rent, admin salaries, marketing) is usually recovered separately in your pricing rather than folded into each worker's burden. Burden captures the cost of employing that specific worker. Shared costs that clearly attach to field staff (liability insurance, field software) are commonly allocated in; keep the line between burden and general overhead consistent so you don't count anything twice.
How often should I recalculate labor burden?
At least annually, and any time a major cost changes — a new insurance premium, a benefits change, added vehicles, or a raise. Burden built on last year's fuel and insurance numbers quietly erodes your margin.
Next steps
Run your own figures through the labor burden calculator to get your burden rate and fully-loaded cost in seconds, then use the billable hourly rate calculator to turn that floor into a rate that includes profit. When you're ready to apply it to real jobs, read how to price service jobs profitably.
This guide is educational and trade-agnostic. It is not tax or legal advice; payroll taxes, insurance rates, and employment costs vary by jurisdiction — confirm local rules and consult a qualified professional.