What is Labor Burden?
An employee’s pay rate and what you actually pay for that employee are not the same. It seems simple, but it’s also easy to overlook. Many construction businesses lose money because they don’t correctly calculate the real cost of maintaining an employee. To avoid inaccurately bidding a job that could cause you to go way over budget, it is important to consider each employee’s direct and indirect costs by calculating their labor burden rate. Having a better understanding of the true costs associated with your employees out in the field will help you gain control of job costs and feel better equipped to bid out future jobs.
Calculating labor burden can be tricky. The key is to locate the hidden costs that organizations overlook. To bid smarter means to know the true cost of labor. This includes taxes, insurance expenses and other employee benefits that you are paying an employee while on the clock. By calculating your fully burdened labor cost, it will help you make more informed decisions about managing your workforce and your budget.
How a Labor Burden Calculator Works
This free labor burden calculator is designed to estimate how much you pay an employee over and above their hourly wage by calculating their total hourly burden. We encourage you to begin by using this estimator to help visualize your labor burden and then recommend you review the information with your accountant. The cost of hiring and retaining an employee can add up quickly. When bidding a job, it seems simple enough to take an employee’s hourly rate and then use that to calculate what it will cost to get the job done. However, if all costs are not taken into account accordingly, it can lead to a project being over budget in the end. Improve project bids and stay on budget by ensuring the labor burden has been accounted for and job costing is accurate.
Step 1: Enter the hourly labor rate at the top in the per hour labor cost field.
Step 2: Next, find your General Liability and Worker’s Compensation Declaration Pages.
Step 3: Locate two similar classes of labor you want to see costs on.
(For example, carpentry code for Liability might be 91343, and 5403 for your Worker’s Comp. When you find those on insurance policy, to the right you will find the rate per $1,000 for Liability, and the rate per $100 for Worker’s Comp.)
Step 4: Enter those two numbers in the GL Rate and WC Rate of the calculator. The cost will be displayed for one hour of labor.
Step 5: Repeat as many times as needed to see the cost of one hour of labor for each labor classification your employees perform.
**We’ve put in some very standard rates for FICA, FUTA, and SUTA for display purposes. Your state may or may not have FUTA, or SUTA, but for this calculation we want to highlight the overburben cost for insurance for one hour of labor.
|Starting Wage||$ /hr|
|General Liability Insurance Rate2:||$ /$1000||+ $0.06|
|Worker's Compensation Rate3:||$ /$100||+ $2.25|
|Total Hourly Cost||$19.81 /hr|
|Total Hourly Burden||$4.81 /hr|
1 3.0% used as a mid-range estimate, actual SUTA rates are affected by your unemployment claims in each state.
2 General Liability rates are typically calculated on a per $1,000 of payroll. And actual rates vary based on claims history, location, and many other underwriting factors. Xx was used as an example of what would be normal. Rate calculated by dividing 10.15 by 1,000. 10.15 is a normal Gl cost associated with electricians per $1,000 of payroll.
3 Workers Compensation rates are typically calculated on a per $100 of payroll. And actual rates vary based on claims history, location, and many other underwriting factors.Xx was used as an example of what would be normal. Rate calculated by dividing 10.15 by 1,000. 10.15 is a normal Gl cost associated with electricians per $1,000 of payroll.
This Labor Burden Calculator is proudly powered by busybusy. If you would like to know more information about the popular app that will manage projects, calculate overtime, simplify job costing and more, visit www.busybusy.com or download the app by scanning the QR code above.
Improve Job Costing by Calculating Labor Burden Rate
There are many reasons to accurately estimate the labor burden of each employee. When you know how much you’re really paying for the total cost of production hours, you can more accurately bid on jobs. This will drive profits, help you avoid losing out on money, and will pave way for bigger, better opportunities where you will be more equipped and better able to estimate how much the job will cost. Calculating your labor burden rate is a great way to improve job bidding accuracy and understand more about the true cost of labor. If you’re looking for ways to gain more control over jobs without taking control, try busybusy’s time tracking app. It will calculate the labor burden for you on each project in real-time, allowing you to track how profitable each project is while the project is still going.
What Calculating Labor Burden Means for Time Tracking
From start to finish, busybusy provides you with tools that seamlessly integrate time tracking, equipment tracking, job site data, and daily reports into your current system. When it comes to time tracking, over 70% of construction companies are still using paper time cards. Not only is it hard to keep track of data, human error and poor records mean money down the drain. busybusy’s time tracking software gives better insight into employee costs, site productivity, and overall job costs.