Worked example: $28/hr plumbing tech
Taxes add $2.38, workers' comp $1.68, benefits $3.50 — the paid hour really costs $35.56. At 85% utilization the billable-hour cost is $41.83, a 49% markup over the wage. Bidding jobs at $60/hr labor yields only a 30% gross margin; the shop that bids $45 'because the tech makes $28' is losing money it cannot see.
- • Recompute the burden every renewal — WC mods and health premiums move annually.
- • Paid drive time and shop time are the usual utilization killers in field trades.
- • Track burdened cost per crew, not per company, when skill mix varies.
FAQ
What is a labor burden rate?
The total cost of an hour of labor beyond the wage: employer payroll taxes, workers' comp, insurance, benefits, and PTO — usually expressed as a percentage markup. For field trades, 35–70% is normal.
How do you calculate burdened labor cost?
Add employer taxes (~8–10%), workers' comp (per-$100 rate × wage), and hourly benefit cost to the wage, then divide by billable utilization. A $25 wage typically becomes a $35–$45 billable-hour cost.
Why divide by utilization?
Because you pay for every hour but only invoice some of them. If a tech is billable 80% of the time, each billed hour must recover the cost of 1.25 paid hours.
What should my charge-out rate be?
Billable cost ÷ (1 − target margin). At a 30% gross margin on labor, a $42 billable-hour cost needs a $60 charge-out rate before materials or overhead recovery.
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