Labor Burden
Definition
Labor burden is the total cost of employing a technician beyond base wages, including payroll taxes, benefits, insurance, uniforms, and workers' compensation.
What Labor Burden Means for Your Business
What it means
A tech who earns $30 an hour on paycheck might actually cost you $42 an hour once you add payroll taxes, health insurance, workers' comp, vacation, training, and phone. That extra $12 is the burden.
Why it matters
Ignoring burden is the fastest way to under-price your services. A shop that calculates pricing off base wage alone loses 20% to 35% of its margin before it even turns the lights on.
How contractors use it
Finance calculates burden per tech per year and divides by billable hours to get the burdened labor rate. That rate feeds job costing, price book updates, and every gross margin calculation.
Real-World Example
An electrical contractor discovered its burden rate was 38%, not the 22% it had been using. Updating the price book lifted target prices on common jobs by 11% and recovered $240,000 in annual gross margin.
Related Terms
Burdened Labor Rate
Burdened labor rate is a technician's true hourly cost after adding payroll taxes, benefits, and other employment overhead on top of base wages.
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.
Gross Margin
Gross margin is revenue minus the direct cost of labor and materials, expressed as a percentage of revenue.
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.
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.
Put This Into Practice with Free Software
Kaldr Tech handles labor burden and everything else you need to run your shop. $0/month, 3.5% + 30¢ per transaction.