The Construction Owner's Guide to Labor Burden

Wages are the number you see. They are not what a worker actually costs you. Add the taxes, comp, and benefits stacked on top, and you get your true labor cost for construction projects — the number your bids should be built on.

Build Better Bids

Uncover hidden employment costs so you don’t unknowingly losing money when bidding work.

Price Change Orders Better

Knowing your labor burden helps you price in the “knock-on” effects when you perform change orders.

See which jobs are really profitable

A small labor error doesn’t shave margin, it erases profit. Avoid corrupting your margins because of one wrong number.

Most contractors don’t lose money on bad jobs. They lose it on good jobs that were priced with the wrong labor number.

This guide breaks down what labor burden actually is, every cost that belongs in it, how to calculate it for your own business, and how to build it into your bids so profit stops disappearing between the estimate and the bank account. It’s written for California construction, contracting, development, and property management businesses, but the core math applies to any builder running crews.

Labor Burden Calculator

Enter last month’s figures and watch the gap appear.

Last month's payroll

Gross wages — what the crew was paid

Employer payroll taxes — FUTA, SUI, etc.

Workers' comp premiums

Benefits — health, retirement

Reimbursements & other — PTO, fees, bonuses

Typical field wage — per hour

What it actually costs you

Wages → True cost

Wages
Taxes
Comp
Benefits
Other

The gap you're not billing for

Labor burden

on top of every wage dollar

True cost / hour

True monthly cost

vs. the wage figure you watch

This tool gives a directional estimate from the figures you enter — it isn’t a substitute for your actual books or advice on your specific situation. Burden varies by trade, workers’ comp class, overtime, and benefits. Your CPA can build the precise number from your payroll records.

Your crew costs more than their wages.

That gap is decision-grade money. It changes what you bid, who you hire, and what you pay yourself. Our San Francisco CPA will rebuild your real numbers in a free review.

What is Labor Burden?

Labor burden is everything it costs to employ a worker beyond their wages: payroll taxes, workers’ comp, benefits, overtime, reimbursements, and more. Your payroll report shows gross wages. That feels like your labor cost, but it isn’t. As a percentage of wages, it’s the most useful labor number a contractor can know — it turns a wage rate you can see into the loaded cost you’re actually carrying on every job.

What's Inside a Construction Labor Burden

As a percentage of wages, it’s the most useful labor number a contractor can know — it turns a wage rate you can see into the loaded cost you’re actually carrying on every job.

Cost	Includes	Why it's missed
Employer payroll taxes	Employer Social Security/Medicare, FUTA/SUTA, CA ETT	Remitted automatically
Workers' comp	Premiums by trade class and payroll	Heaviest burden item in the trades
Health insurance	Employer medical, dental, vision	Often booked as overhead
Retirement	Employer 401(k) match	Reviewed annually, not per job
Overtime premium	Cost above base rate	Closer to the norm than the exception
Sick pay & PTO	Paid, non-revenue hours	Disconnected from labor cost
Reimbursements	Mileage, tools, per diem, phone	Coded to expenses, not payroll
Payroll fees	Per-employee/per-run costs	Small per line, real in total
Bonuses	Spot and completion incentives	Too irregular to model

How to Calculate Labor Burden

As a quick gut-check, take last month’s gross wages and multiply by 1.20. Wages of $100,000 → roughly $120,000 in true cost. If that gap surprises you, you’re underpricing labor.

Labor Burden Formula

Labor burden rate = (Total payroll costs − Gross wages) ÷ Gross wages

Fully burdened cost = Gross wages × (1 + burden rate)
Fully burdened hourly rate = Hourly wage × (1 + burden rate)

Labor Burden Monthly Example

Let’s say in 2025, a California concrete contractor at ~$3.6M/year assumes payroll runs $95,000/month.
Rebuilt in full:

Payroll cost	Monthly
Gross wages	$95,000
Employer payroll taxes	$9,000
Benefits	$6,500
Workers' comp	$3,000
Reimbursements & other	$2,000
True payroll cost	$115,500

Burden is $20,500. The rate, if we divide $20,500 by $95,000, is about ≈ 21.6%.

This means in every $1 wages, the cost is actually ≈ $1.22. That’s $20,500 a month — about $246,000 a year — and it was the number used to bid jobs and judge margins.

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