Labor burden

An employee paid $30 an hour costs you more than $30 an hour. On top of the wage, you pay the employer share of Social Security and Medicare (7.65% of wages: 6.2% for Social Security up to the annual wage base, $184,500 for 2026, plus 1.45% for Medicare), federal and state unemployment taxes, workers’ compensation premiums, any benefits such as health insurance or retirement contributions, and paid time off.

To find your burden rate, add up those costs for a year and divide by the wages you paid. Then account for the hours the employee actually spends on jobs. Paid holidays, shop time and travel between jobs aren’t billable, so the cost per billable hour is higher than the cost per paid hour.

Workers’ compensation is often the biggest variable, because rates depend on the class code for the work and on your state. Higher-risk work such as roofing usually costs more to insure than lower-risk trades.

Leaving labor burden out of your labor rate means every hour you sell loses money before overhead is even counted. Build it into your hourly rate or into the labor lines of each estimate.