Skilled trades are costing employers more than ever, and the pressure is real: bid low enough to win the job, but high enough to stay profitable. One of the most important steps in that balancing act is understanding the TRUE cost of your employees — the fully loaded labor cost that drives your job cost tracking, estimating, and overall project profitability.
How can you easily calculate the cost? What’s the secret?
It’s not paying $1,000 for a fancy book, seminar, or contractor software that promises to “fix your estimating.”
It’s simple math. Numbers you already have.
Let’s break it down.
1. Start With Base Pay (Gross Pay)
This is the hourly rate you pay your employee. Example: Base Rate = $25/hr
2. Add Your Burden Rate (Direct Costs)
Your burden rate covers employer‑side direct costs:
Payroll Taxes
Workers’ comp
Health insurance
Retirement
Other benefits
These percentages vary by state, WC class code, and benefit package.
Let’s build three example burden rates:
Scenario A: No Benefits (Lean Shop)
Taxes: 7.45%
WC: 7%
Benefits: 0%
Total Burden: 14.45%
Scenario B: Full Benefits
Taxes: 7.45%
WC: 7%
Benefits: 15%
Total Burden: 29.45%
Scenario C: Hybrid + Higher WC
Taxes: 7.45%
WC: 10%
Benefits: 8%
Total Burden: 25.45%
3. Add Overhead (Indirect Costs) - These are your hidden costs!
Overhead is everything it takes to run your company that doesn’t directly make you money:
Office staff
Rent
Utilities
Phones
Liability insurance
Software
Trucks & tools
Paid time you can’t bill (training, shop time, PTO, sick time)
Lean contractors might run 10% overhead. Heavier shops might run 40–50%+.
This is where many contractors underestimate their true cost — especially when they grow quickly and don’t have strong back‑office support or construction admin help.
4. Fully Loaded Labor Burden
Fully loaded labor burden is the total true cost of an employee, including wages, taxes, workers’ comp, benefits, overhead, and every indirect expense required to keep them on the job.
Let’s run the math using a $25/hr base rate.
Scenario A: Lean Shop (No Benefits)
Base Rate: $25.00
Burden: 14.45% → $3.61/hr
Overhead: 10% → $2.50/hr
Fully Loaded Cost: 25+3.61+2.50=$31.11/hr
Scenario B: Full Benefits
Base Rate: $25.00
Burden: 29.45% → $7.36/hr
Overhead: 30% → $7.50/hr
Fully Loaded Cost: 25+7.36+7.50=$39.86/hr
Scenario C: Hybrid + Heavy Salary Overhead
Base Rate: $25.00
Burden: 25.45% → $6.36/hr
Overhead: 50% → $12.50/hr
Fully Loaded Cost: 25+6.36+12.50=$43.86/hr
The Lesson:
If you bid labor at $25/hr because that’s what you pay your employee.
Your true cost might be $31/hr… or $40/hr… or even $45/hr depending on your structure.
Once you know your fully loaded labor burden, you can:
Bid accurately
Protect your margins
Price work consistently
Forecast labor cost for future hires
Avoid “winning” jobs that sink your company
You will always win if you know the numbers!
A Quick Word From Pine & Anchor
If you’re a small contractor trying to get control of your job costs, labor burden, and back‑office operations, Pine & Anchor helps you stay organized without hiring full‑time admin staff.
We support:
job cost tracking
contractor bookkeeping
project documentation
estimating organization
back‑office workflow cleanup
Simple systems. Clear numbers. Better bids.
If you want help building your labor burden calculator or tightening your estimating process, Pine & Anchor is here to support your shop.
