Labor Burden Rate Calculator
Enter the pay and the other costs of an employee to see what they really cost per hour, day and year.
Working for yourself instead? The Freelance Day Rate Calculator works out the day rate you need.
Leave a cost empty if it does not apply. Empty hours use 2,080 paid and 1,800 worked.
Type the pay for the year and the full cost appears here.
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An employee costs more than their pay. Taxes, benefits, pension, training, equipment and a share of the office and management all add up. Enter what applies and this shows the full cost per hour, day and year, so you can price work or budget a hire properly.
Someone paid $50,000 can easily cost the business $65,000 or more once everything is counted. The hourly figure at the top is the one to use when you quote a job or check that a role pays for itself.
How it's worked out
- The percentage costs (taxes and insurance, pension, management) are worked out from the yearly pay.
- The yearly costs (benefits, training, equipment, office) are added as they are.
- The full cost is pay plus all of those. Divide it by the paid hours, or by the hours actually worked, to get an hourly cost. Divide by 8 for a day.
Pay of $50,000, 10% taxes and insurance, 4% pension and $6,000 of benefits comes to $50,000 + $5,000 + $2,000 + $6,000 = $63,000. Over 1,800 worked hours that is $35 an hour.
Common mistakes
- Dividing by every paid hour. Holidays and sick days are paid but not worked, so the cost of an hour of real work is higher.
- Leaving out the small items. Software seats, equipment and training look minor one at a time and add up over a year.
- Forgetting the share of management time. Someone has to supervise, and their time costs money too.
- Using the rates from one country for another. Employer taxes and required benefits differ.
Questions
What is a labor burden rate?
It is the full cost of an employee compared with their pay alone. The burden is everything on top of the wages: employer taxes, benefits, pension, training, equipment, space and management time.
Why are there two hourly figures?
One divides the cost by every paid hour. The other divides it by the hours actually worked, after holidays and sick days. The second is higher, and it is the one to price or budget with.
Where do I find my own figures?
Your payroll or accounting records show the employer taxes and benefits. The examples in the empty boxes only show the shape of the numbers. Check your own, as rules and rates differ by country and change over time.
Is the burden the same as the markup I should charge?
No. The burden is what the person costs you. A price also needs your profit and the rest of the business overheads on top.
Does this work for a contractor?
Mostly not. A contractor invoices you and covers their own taxes and benefits. Use this for people on your payroll.
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