Bid Smarter—Know The True Cost Of Labor

Using busybusy to Crunch the Numbers

So, let’s start at the beginning. Almost everybody hates the accounting aspect of running a construction business. After all, if they loved it, they’d be an accountant. But knowing how to calculate your labor burden isn’t just a handy tool for staying ahead of the game. It’s essential for keeping you from falling flat on your ass in one of the most competitive markets out there. 

Not having the right information can lead to making some pretty bad decisions. We’ve seen it happen time and time again. In terms of not knowing your labor burden, those bad decisions can lead to failures that can be critical for your business. As a business owner, you need to take charge now. Doing so can have a big impact on small businesses, especially those in the construction industry. 

What Is a Labor Burden?

To put it in plain English, a labor burden is the indirect cost when paying an employee. You might think you know how much you’re paying to keep a guy on your team in terms of what you pay an employee. You give Phil fifteen bucks an hour to do his job and that’s that, right? However, it isn’t taking into account things such as worker’s compensation, general liability, employee benefits, payroll taxes and anything else that might be coming out of your pocket.

I’ve seen a lot of truly smart business owners get thrown for a loop after realizing they were actually losing money on their jobs because they had not calculated the real cost of maintaining their employees. 

It’s simple enough to do. A contractor will complain that he’s paying fair wages, he’s getting his jobs done in a timely manner with no complaints, he’s getting plenty of jobs, but at the end of the year, he’s still finding himself in the hole. Then, once he finally employs the use of a labor burden calculator he’ll be stunned to realize the cost of hiring and holding on to his employees is far greater than he thought. Usually, that also means he’s been seriously undercharging on his projects. I’m sure you can see why this is a problem. 

The First Steps in Calculating Your Labor Burden

Calculating your overall labor burden cost isn’t exactly an easy undertaking. One of the things every contractor has to keep in mind is the variables like payroll taxes and worker’s compensation are going to be unique for every construction business. 

This makes working out those nitty-gritty little details even tougher. Fortunately for you, you’re already used to running a business so it shouldn’t be a problem. It’s just going to take a little bit of time and patience to get all your ducks in a row so you can nail down everything you need as a business owner to get a better idea of how much you’re actually paying in terms of additional costs. 

One thing you’ll want to remember is this formula: 

Indirect Costs / Direct Costs X 100%  = Labor Burden

Yeah, we hate math too, but it’s a pretty simple formula. Keeping it handy will give you a quick and easy way to run down costs when it comes to knowing what’s actually going on when it comes to your profit margin. 

Of course, at this point, there might still be some of you who wish they had a burden rate calculator on hand. This is a simple tool that would allow inputting information without all the hassle and fuss. 

Well, you’re in luck. Enter busybusy’s Labor Burden Calculator

Our Labor Burden Calculator

busybusy offers a free labor burden calculator anybody can use to start figuring out where they stand with their own labor burden. When you need to estimate how much you’re paying your employees over and above their hourly wage, you can use this calculator to quickly and easily identify these costs, which can, in turn, begin helping you make sure you’re making the right decisions when it comes to estimates on future jobs. 

It’s easy to use and keeps to the same clean, simple and stylish format that we use in our busybusy app. When you pull up our free labor burden calculator, all you do is input a few details regarding your employee’s starting wages, general liability and worker’s compensation and you can get the information you need to determine the real cost of an hour of labor. It’s as simple as that, and you can repeat the process as many times as you need. 

What Can You Do With That Info?

More than you might think. When you know how much you’re really paying for the total cost of production hours, you can more accurately bid on jobs. That will keep you out of the hole, will drive up profits and in the long run will drive you to bigger and better opportunities. Who knew something so simple could have a big payoff? 


That’s not the only way busybusy can keep your jobs profitable, either. Check out our free labor burden calculator today, then stop by and learn more about busybusy and how it can help you keep your business booming.