Burdened Labor Rate
Definition
Burdened labor rate is a technician's true hourly cost after adding payroll taxes, benefits, and other employment overhead on top of base wages.
What Burdened Labor Rate Means for Your Business
What it means
Burdened labor rate is the honest answer to the question, 'what does this tech actually cost me per hour?' It takes the paycheck rate and adds every dollar you spend to keep that person employed.
Why it matters
Everything downstream depends on this number: pricing, estimating, job costing, and gross margin. Use the paycheck rate instead and you are guaranteed to underprice.
How contractors use it
Finance calculates burdened rate once a year per tech tier. The price book, estimating templates, and job costing reports all reference the burdened rate, not base wages.
Real-World Example
A commercial HVAC tech earning $34 per hour base had a burdened rate of $48.20 after adding 42% burden. That $14 gap, multiplied by 1,600 billable hours per tech per year, was $22,400 per tech in hidden cost.
Related Terms
Labor Burden
Labor burden is the total cost of employing a technician beyond base wages, including payroll taxes, benefits, insurance, uniforms, and workers' compensation.
Effective Hourly Rate
Effective hourly rate is total billed revenue divided by total paid hours, revealing what each tech is actually earning the business per clock hour.
Cost of Goods Sold
Cost of goods sold, or COGS, is the direct cost of labor and materials required to deliver the services you billed, excluding overhead.
Job Costing
Job costing is the practice of tracking every labor, material, and overhead cost tied to a specific job so you can measure its true profitability.
Gross Margin
Gross margin is revenue minus the direct cost of labor and materials, expressed as a percentage of revenue.
Put This Into Practice with Free Software
Kaldr Tech handles burdened labor rate and everything else you need to run your shop. $0/month, 3.5% + 30¢ per transaction.