A practical loaded-labor formula
Use amounts on the same hourly basis. Annual or monthly costs should be spread across realistic productive hours, not simply every calendar hour.
Worked example: a $25 hourly wage
The additional $11.50 is a 46% burden on the $25 wage. A 16-hour estimate therefore carries $584 of labor cost, not $400—a $184 difference before overhead and profit.
Use realistic productive hours
Paid holidays, training, travel between jobs, meetings, estimating, callbacks, and administrative time may reduce the hours available to recover labor cost. If a period cost is divided by an unrealistically high number of billable hours, the rate will look low while the cash still leaves the business.
Keep labor burden and general overhead distinct
- Assign employee-specific or payroll-related costs to labor burden when that matches your accounting method.
- Assign general business costs to overhead, then allocate them separately.
- Do not count the same insurance, vehicle, supervision, or paid-time cost twice.
- Reconcile estimates with payroll, insurance, and actual completed-job results regularly.
Questions people ask
Is an employee's wage the same as labor cost?
Usually not. Employer payroll costs, workers' compensation, benefits, paid time that cannot be billed, and other labor-related costs can make the true hourly cost materially higher than the wage.
What is a labor burden percentage?
A simple labor burden percentage is additional employer labor cost divided by base wages. A $25 wage with $11.50 of additional burden has a 46% burden rate and a $36.50 loaded hourly cost.
Which payroll-tax or insurance rate should I use?
Use the rates and actual costs applicable to your entity, workers, location, and policy. ScopeRate does not supply tax, insurance, or legal rates; confirm them with current records and qualified advisers.