Labor Burden (Payroll Burden)

What is labor burden, and how do I calculate it?

Labor burden (also called payroll burden) is the extra cost of labor in addition to an employee's regular wages. You don't need to worry about burden when using our payroll software, but it is helpful when you calculate job costs, to more accurately know the total cost of each project, and your general cost of doing business.

Burden includes employer taxes, insurance, benefits, vacation time and any other costs that are based on regular payroll wages.

Burden does not include employee withholding, since that is deducted from gross wages.

For example, a US employee who is paid $10 an hour may have the following payroll burden from employer taxes:

  • Employer Social Security (FICA)-- 6.2%
  • Employer Medicare-- 1.45%
  • Federal Unemployment (FUTA)-- .8%
  • State Unemployment (SUTA)-- 2.5%
  • Worker's Comp Insurance-- 15%
  • Disability Insurance-- 2%

Also add the following benefits:

  • Medical Coverage-- $240 per month / $1600 wages = 15%
  • Employer Pension contributions-- 2%
  • Paid Holidays-- 6 days / 194 days worked = 3.1%
  • Paid Vacation-- 10 days / 194 days worked = 5.2%

The total is a burden percentage of 53.25%. That results in a net labor cost of $15.32 per hour.

HINT-- Some employers also include the cost of managing payroll, and add it to the other payroll burden items.

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