What labor burden is
The number on a worker's check is not what that worker costs you. Labor burden is the rest of it: the employer's half of the payroll taxes, workers' compensation premium, the part of your liability coverage that rides on payroll, health and retirement contributions, allowances, and every paid hour nobody was on site for.
burden = employer payroll taxes + insurance + benefits + paid non-productive time burden rate = burden ÷ wages
The burden rate is a ratio, not a dollar amount. A burden rate of 0.30 means thirty cents of employer cost for every dollar of wage, so the hour costs the wage plus thirty percent, before a single point of overhead or profit is added.
Burden is not overhead and it is not markup. Overhead runs whether or not anyone is on a jobsite; markup is what you add on top of total cost to earn a profit. Burden sits between them, a direct cost of employing the person swinging the hammer, and belongs in job cost before either is applied. It is not the worker's own deductions either. A matched tax is split, and the worker's half is the worker's money. And it attaches only to people on your payroll; a subcontractor's invoice carries none of yours.
This page publishes no average burden percentage, because no official source publishes one. Two of the four taxes below are set in law and published; the insurance and benefit components are quoted to your company, in your state, for your trades.
The four federal payroll taxes in the burden
Two of these taxes are split with the worker and two are yours alone. Only the employer's side is burden.
Social security. IRS Publication 15 states that "the rate of social security tax on taxable wages is 6.2% each for the employer and employee" [1]. The employer's half is burden; the worker's is not [1].
Medicare. "The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2025," and "there is no wage base limit for Medicare tax" [1]. Your 1.45% runs on every dollar of wage, all year [1].
FUTA. Federal unemployment tax is employer-only. The Department of Labor states that "employers in states without a further credit reduction will have a FUTA tax rate of .6% (on the first $7,000 of wages paid) for the year" [3]. That 0.6% is what is left after a credit, and the same page states that credit reductions "are made from the regular credit reduction of 5.4%" [3]. Where a state has not repaid federal advances, the credit is cut and the employer's rate rises above 0.6% [3]. The list for a year is not settled until November of that year [3], and the extra is owed on the whole year's wages.
State unemployment (SUTA). Set by each state, not by the federal government. Your rate arrives on the notice your state workforce agency sends you. A new employer is assigned a starting rate until it has enough claims history to be rated on its own experience. The state sets the wage base too, and the spread is wide (see the state section below).
Add the three federal employer rates together and you have 8.25% of wages (6.2 + 1.45 + 0.6) [1][3] before a dollar of state unemployment tax, insurance or benefits. That is the floor of a burden rate, not the whole of one.
What a wage base does to the rate
A wage base is a ceiling on the wages a tax applies to. Once a worker's year-to-date wages pass it, the tax stops for that worker until January. Publication 15 gives the social security ceiling: "the social security wage base limit is $184,500" [1]. FUTA's ceiling is the first $7,000 of wages [3], and Medicare has no ceiling at all [1].
This is why one annual percentage hides what happens week to week. Follow a $30 hourly wage, used here purely as an illustration, through a year.
- The first $7,000 of wages [3] arrives after 233 hours at $30 an hour (7,000 ÷ 30 = 233.3). Through those hours the three federal employer taxes run at 8.25% of wage [1][3], which is $2.48 an hour (30 × 0.0825 = 2.475).
- From hour 234 onward FUTA is zero for that worker [3], and so is any state unemployment tax whose wage base is also $7,000. The federal employer rate drops to 7.65% (6.2 + 1.45) [1].
- The social security ceiling of $184,500 [1] is 6,150 hours at $30 an hour (184,500 ÷ 30 = 6,150). That is more hours than a year holds, so at this wage the 6.2% [1] runs all year. Pay a supervisor or an owner enough and it does stop, and from there the federal employer rate on their wages is 1.45% [1].
The tax slice of burden is heaviest in the first weeks of the year and lightest at the end. A January burden rate is not an annual burden rate. Build the annual figure from a full year of wages and a full year of tax, then apply it consistently.
Wage bases reset in January
Every wage base is per employee, per calendar year, and resets on January 1. That includes a worker hired in December, whose base starts again weeks later. A worker who moves between your entities mid-year can reset a base. Confirm the treatment with your payroll provider and your state agency.
Workers' comp, general liability and benefits
This site cannot publish these for you: nobody publishes a single national figure for them, and anything presented as one is invented.
Workers' compensation. Premium is filed per state and quoted per employer, against the classification of the work and the employer's own claim history. A roofing payroll and an office payroll inside the same company do not carry the same rate. The figure for your burden calculation is on your own policy declarations page. Our separate guide on workers' compensation for contractors covers how that rate is built and what moves it.
General liability. Some liability policies are rated against payroll or receipts and audited at the end of the term, so the cost per worked hour is not fixed when you bind the policy. Read your own policy and your own audit worksheet, and carry the audited figure into next year's rate.
Benefits and paid time off. Employer-paid health premiums, retirement contributions, tool and vehicle allowances, training, licensing, and the paid holiday and vacation hours themselves are all burden. Pull twelve months of actuals from your books rather than estimating. These costs also do not scale with wages the way the tax lines do (a health premium is a cost per head per month), so run the rate per person, or at least per class of worker.
Everything in this section is an input you supply. Our labor burden calculator takes the published tax constants as defaults and leaves these fields empty on purpose.
Turning burden into a billable hour
Burdened cost divides by the hours you can sell, not the hours you pay for.
burdened annual cost = annual wages + annual burden productive hours = paid hours − vacation − holidays − other non-billable paid time burdened cost per productive hour = burdened annual cost ÷ productive hours
Paid time off is counted twice, and that is correct: once as a cost in the numerator, because you paid for the hour, and once as a subtraction from the denominator, because you cannot bill it. Training, yard time, unbilled drive time, warranty callbacks and weather days come out of the denominator too.
Here is the arithmetic on a labeled example. A worker scheduled 40 hours a week for 52 weeks is paid for 2,080 hours (40 × 52 = 2,080). Give that worker 80 hours of vacation and 80 hours of holidays and the productive denominator is 1,920 hours (2,080 − 160 = 1,920). Dividing the same burdened cost by 1,920 instead of 2,080 raises the hourly figure by 8.3% (2,080 ÷ 1,920 = 1.0833). Nothing about the worker changed. Only the denominator did, and that 8.3% is the part of the year you were giving away.
Settle one more question once: whether small tools and vehicle costs live in burden or in job overhead. Either treatment can be defended; counting them in both cannot.
Where this varies by state
Unemployment tax moves most across state lines. Each state sets its own taxable wage base and its own new-employer rate, and the Department of Labor publishes them in one table each January [4]. This site keeps verified 2026 records for 45 of the 51 jurisdictions (the 50 states plus the District of Columbia) [6] behind the labor burden calculator.
| State | Taxable wage base (2026) | New employer base rate (DOL table) | Rate the state agency bills |
|---|---|---|---|
| California | $7,000 | 3.40% | 3.4% |
| Colorado | $30,600 | 1.53% | 3.05% |
California taxes the first $7,000 of each worker's wages at a new-employer rate of 3.40%; Colorado taxes the first $30,600 at a new-employer base rate of 1.53% [4]. Colorado's base is more than four times wider (30,600 ÷ 7,000 = 4.37) [4], so the same worker at the same wage runs up tax there for far longer into the year. A lower headline rate does not mean a lower bill, and the headline rate is not even the bill. Colorado's agency publishes the 2026 introductory rate as a 1.53% base plus a 0.17% support rate plus a 1.35% solvency surcharge, a combined 3.05% [5], which is the figure our verified record and the calculator carry. The federal table prints only the base.
The table's own footnotes add two cautions. The published new-employer figure is a floor: "New employer rate shown is the base rate. Higher rates may apply depending on industry classification and/or other factors in state law" [4]. Several states assign construction employers a different starting rate. And the experienced-employer rates in that table "do not include surtaxes, penalties, surcharges, or applicable non-UI taxes" [4], a second reason the number on your own rate notice can sit above anything published.
Crews in more than one state mean more than one figure, because unemployment tax follows the state where the work is performed. Take your rate from the notice your agency sent you, confirm the wage base with that agency, and enter both in the labor burden calculator rather than assuming a neighboring state's figure travels across the line.
Frequently asked questions
What is labor burden?
Labor burden is every employer cost attached to an hour of work beyond the wage itself: the employer's share of payroll taxes, workers' compensation, liability insurance rated on payroll, benefits, and paid time nobody worked. The burden rate expresses it as burden divided by wages.
What is labor burden in construction?
The same definition, with the components that weigh most on a jobsite: workers' compensation priced to the classification of the work, unemployment tax that stops at a state wage base, and non-billable paid hours such as yard time, travel and weather days. Because those hours are paid but cannot be sold, construction burden is measured per productive hour rather than per paid hour.
How to calculate labor burden
Add the employer payroll taxes, insurance, benefits and paid non-productive time for a full year, divide that total by the wages paid in the same year, and you have the burden rate. To price work, add the burden to the wages and divide by productive hours rather than paid hours.
How to figure labor burden
Start with the published tax rates: employer social security at 6.2%, employer Medicare at 1.45% and net FUTA at 0.6%. Then add your own state unemployment rate from your rate notice and your own insurance and benefit costs from your policies and books. No national figure can substitute for those documents, so confirm each one with the agency or carrier that issued it.
Related
- Labor burden calculator: enter wages, taxes, insurance and productive hours and see the burdened hourly cost, with the math shown.