How to Calculate Labor Burden as a Contractor

Labor burden is the full cost of employing a worker beyond their base wage: the employer share of payroll taxes, workers comp, general liability, benefits, training, and paid time off. It is the gap between what a worker earns and what they actually cost you per hour worked. For a small contractor, that gap is where profit quietly disappears, because a bid built on the bare wage loses money on every hour once the real costs are paid.

Understanding burden is the difference between a business that grows and one that stays busy but broke.

Start with the annual base wage, then add the employer share of Social Security, Medicare, and unemployment taxes. Add workers comp, which varies sharply by trade and state, and the labor portion of general liability. Add benefits, retirement contributions, training, and the cost of paid holidays and vacation. That total is the fully loaded annual cost of the worker.

Then divide by billable hours, not paid hours. PTO, drive time, shop time, and training are paid but cannot be billed. Dividing by the hours you actually charge gives the true cost per worked hour that every bid should start from.

Burden commonly adds 25 to 45% on top of base wage. A roofer or framer carries heavier burden than a painter or finish carpenter because workers comp rates rise steeply with job risk. A $30 per hour worker often costs $38 to $44 fully burdened, and in a high-comp trade the top of that range can climb higher. The exact figure is specific to your state, your comp experience rating, and the benefits you offer.

Run the number for each crew role rather than using a single blended figure, because a high-risk trade can distort the average.

You set your burdened labor rate once in ContractShield, and the AI quote builder applies it to every estimate automatically. Your bids reflect true cost from the first line, so you stop accidentally pricing below what the labor actually costs. The quote then becomes the project plan and the milestone invoice, and you collect on Stripe as stages complete rather than floating payroll on net-60 terms. The platform fee is 2% per job (1% each side), capped at $250, no per-lead fees.

Burden and markup are two different jobs and contractors who confuse them lose money. Burden gets you to the true cost of an hour of labor. Markup is added on top of that true cost to cover overhead and profit. If you skip burden and apply markup to the bare wage, the markup is eaten by taxes and insurance before any profit reaches you. Get burden right first, then set markup on the fully loaded number. Burden also shapes cash flow, because payroll, taxes, and workers comp are due on a schedule that does not wait for a slow-paying client. That is why milestone billing matters: collecting as stages complete keeps the cash coming in to cover the burden you are already paying out. Accurate burden plus milestone payments is how a small crew stays solvent through a busy season.