What labor burden actually includes
Labor burden is every dollar you pay because someone is on your payroll, on top of the wage on their pay stub. It splits into two groups, and only one of them is the same in every state:
- Payroll taxes. Social Security, Medicare, federal unemployment (FUTA) and state unemployment (SUTA).
- Insurance and benefits. Workers' compensation, the payroll-rated share of general liability, health coverage, retirement contributions, and the rest: uniforms, phones, tools, training, per diem.
Burden is usually quoted as a single percentage of wages, and that percentage means very little without the inputs behind it. Social Security and Medicare together are a fixed 7.65% of every wage dollar up to the Social Security wage base. Everything above that floor is your state's unemployment rate, your workers' comp class code and the benefits you choose to pay, none of which is an average. The worked example this calculator opens on reaches 8.1% on payroll taxes alone, and that is before workers' compensation, which is usually the largest line of all. Two crews earning the same wage can be tens of points apart, which is why a borrowed percentage is worth so little and the arithmetic is worth doing, here or in our labor burden spreadsheet.
Burden % = total burden ÷ annual wages
True cost per productive hour = (annual wages + burden) ÷ productive hours
The federal lines are the same everywhere
Three of the tax lines do not care which state you are in:
- Social Security: 6.2% of wages, as the employer's share, up to the annual contribution and benefit base. For 2026 that base is $184,500, so wages above it carry no more Social Security tax.
- Medicare: 1.45% of wages, with no wage cap at all. (The Additional Medicare Tax above $200,000 is withheld from the employee, not matched by the employer.)
- FUTA: 0.6% net. The gross rate is 6.0% on the first $7,000 of each employee's wages, and an employer in a state in good standing gets a 5.4% credit against it, which leaves $42 per employee per year.
Check whether your state is a credit-reduction state
A state that has not repaid its federal unemployment loans loses part of that 5.4% credit, and its employers pay a higher effective FUTA rate, in 0.3-point steps for every year the loan is outstanding. The list is published by the U.S. Department of Labor and is not final for a tax year until November. If your state is on it, raise the FUTA rate in the calculator.
The state lines are why two identical crews cost different money
Three burden lines are set where you work, not in Washington:
- SUTA (state unemployment). Every state sets its own taxable wage base and its own new-employer rate. Among the states with a published 2026 figure, the wage base runs from $7,000 (the federal floor) up to $78,200 in Washington, an eleven-fold spread in how much of a wage is taxed at all. A few states publish no flat new-employer rate, assigning one from the employer's own industry instead.
- Workers' compensation, priced per $100 of payroll, by class code, by state and by carrier. For most construction trades this is the single largest burden line, and it is the one number this calculator cannot supply: it comes off your own policy.
- General liability, to the extent your premium is rated on payroll rather than on receipts.
Construction is singled out in the SUTA schedules of many states, because the industry's layoff pattern draws more from the fund. Pennsylvania assigns newly liable construction employers 10.5924%, against 3.8220% for everyone else; Ohio charges construction 5.7% where the standard new-employer rate is 2.7%. A handful of states run the other way, and several publish no separate construction rate at all. The calculator fills in the 2026 figure for your state, says whether it is the construction rate or the standard one, and tells you when the state publishes a construction rate it has not put a number to. In that case, the rate on your own notice is the only one worth using.
The productive-hours trap
This is where most burden calculations quietly go wrong: they divide the loaded cost by 2,080 hours. Nobody bills 2,080 hours.
Productive hours = paid hours − paid time off − non-billable hours
Take two weeks of paid time off (80 hours) and 200 hours a year of shop time, travel, training, warranty callbacks and rain days, and 2,080 paid hours become 1,800 productive ones. You still pay for all 2,080. Dividing by the wrong number understates every hour you sell by about 13% before a single tax is added.
That is the whole difference between a loaded cost per paid hour and a true cost per productive hour. Only the second one belongs in a bid.
How to use this calculator
- Pick your state. The 2026 unemployment wage base and new-employer rate fill in automatically, using the construction rate where the state publishes one. Both fields stay editable. The rate on your annual notice beats any default, because it reflects your own claims history.
- Enter the wage and the hours. Paid hours, then the time off and the non-billable hours that come out of them.
- Enter your workers' comp rate per $100 of payroll, from your policy declarations. The calculator ships this field blank and warns while it stays that way, because a rate that varies by trade, state and carrier has no default worth printing. General liability is optional, for the share of the premium that is rated on payroll.
- Add the benefits you actually pay: health, retirement, and anything else per year.
- Optionally set a target margin to get the minimum hourly rate you can bill without losing money on the hour.
Then take the true cost per productive hour into a bid, not the wage.
FAQ
What is a typical labor burden percentage in construction?
There is no typical number worth quoting. Social Security and Medicare are a fixed 7.65% floor up to the Social Security wage base. Above it, the figure is driven by your state unemployment rate and wage base, your workers' comp class code and the benefits you pay. The worked example on this page (California, $32 an hour, payroll taxes only) comes to 8.1%. Add workers' compensation, health coverage and a retirement match and it climbs steeply, which is why the calculator adds up your own lines instead of applying an average.
Does labor burden include overhead?
No. Burden is what an hour of that person costs you. Overhead is what the business costs you (office, trucks, insurance not rated on payroll, software), and it is spread across all your jobs, usually as a percentage of direct cost. Adding overhead into burden double-counts it when you then apply your overhead percentage in a bid.
Why does my state change the answer so much?
Two of the three state lines are set locally. Among the published 2026 figures the unemployment taxable wage base ranges from $7,000 to $78,200, and many states assign construction employers a much higher new-employer rate than other industries. Pennsylvania's, for instance, is 10.5924% against 3.8220%. Workers' compensation, the largest line for most trades, is priced per state and per class code on top of that.
Related tools
- Bid price calculator: put the true cost per productive hour into a bid, then add overhead and margin.
- Change order calculator: the same burdened labor cost, applied to added work rather than the original scope.