What is labor burden, exactly?

Labor burden is the total cost to employ someone, expressed as a percentage on top of their base wage. It includes payroll taxes (FICA, FUTA, SUTA), workers' comp, general liability allocated to labor, health insurance and retirement contributions, paid time off and holidays, training and certification, vehicle and tool allocation, and the unbilled time between jobs. For a contractor crew, burden typically runs 30–55% — meaning a $25/hr employee actually costs you $32.50–$38.75 per worked hour before any profit or overhead markup.

What's the difference between labor burden and overhead?

Labor burden is the cost layer that attaches directly to a person's productive hour — it scales with payroll. Overhead is the company-level cost that exists whether or not a specific job runs — rent, software, owner pay, marketing, office staff, accounting fees. You apply burden to get from base wage to fully-loaded crew cost, then apply an overhead-and-profit markup on top to get from cost to bill rate. Mixing them is the most common pricing mistake — contractors who lump burden into 'overhead' end up under-billing labor by 20–30% on every job.

What's a realistic labor burden percentage for a small residential contractor?

For a non-union residential GC in a mid-cost-of-living state running W-2 employees with basic benefits, a realistic burden is 32–42%. Add 5–8 points if you offer health insurance with employer contribution. Add 3–5 points if you're in a high-workers-comp state (CA, NY, IL) or a high-injury trade (roofing, framing). Subtract 4–7 points if you're in a low-tax state (TX, FL, TN) and offer minimal benefits. Below 28% is usually a sign you're missing line items; above 55% is usually a sign you're allocating overhead into burden incorrectly.

How do I calculate burden for a worker who's only on the job half the time?

You don't burden by job hours — you burden by available worked hours per year. A full-time employee has roughly 2,080 paid hours but only ~1,750–1,850 productive billable hours after paid time off, holidays, training, and the gaps between jobs. You divide annual fully-loaded cost by productive hours (not paid hours) to get the real per-hour cost. Pricing by paid hours instead of productive hours is the second most common burden mistake — it understates true cost by 10–18%.

Should I bid labor at burdened cost or at the bill rate?

Always price the bid at bill rate. The customer pays bill rate, not your cost. Your bill rate equals burdened cost times an overhead-and-profit multiplier — typically 1.4 to 1.8 depending on overhead structure and target net margin. So a $25/hr base wage at 38% burden ($34.50 burdened cost) at a 1.55 multiplier bills at roughly $53.50/hr. Quoting customers at burdened cost is the fastest way to net zero — burden is recovery of cost, not profit.

Does labor burden apply to subcontractors and 1099 workers?

Different math. For 1099 subs, you don't pay payroll taxes, workers' comp, or benefits — but you do pay a marked-up labor rate that already includes the sub's burden, plus your own GC markup (typically 15–25%) for managing them. For W-2 employees you control directly, full burden applies. Misclassifying a worker as 1099 to dodge burden is one of the highest-cost mistakes in this business — see the contractor employee misclassification guide for the IRS economic-realities test and what gets caught on audit.

Labor Burden in 2026: What a $25/Hour Employee Actually Costs You

If you're paying a framer $25 an hour and billing him out at $35, you're losing money on every job that framer touches.

That sentence will sound wrong to a lot of contractors, because it contradicts the math they've been doing in their heads since they started. The fix is understanding labor burden — the full loaded cost of having a person on payroll — and pricing labor against that number, not the wage on the paycheck.

This is the math ProJobCalc Pro automates inside every bid. But you should understand what it's doing under the hood, because the contractors who don't understand burden are the ones who finish a busy year wondering why their bank account is flat. This guide walks the actual numbers for a residential contractor in 2026, by trade, by state-tax-environment, with the markup logic to apply to your bill rate.

What Labor Burden Actually Includes

Labor burden is every dollar you spend on an employee that isn't the gross wage on their pay stub. It is not overhead. Burden attaches to the person — it scales when payroll scales. Overhead exists whether or not that person is on the clock today.

There are nine line items that show up in every honest burden calculation. Most contractors I see are missing three to five of them.

1. Employer payroll taxes (FICA + Medicare)

You pay 7.65% on top of every gross wage dollar — 6.2% Social Security and 1.45% Medicare. This is the floor. There's no version of W-2 employment where you don't pay this. On a $25/hr wage, that's $1.91/hr before anything else.

For 2026, the Social Security wage base is $176,100 — earnings above that line are not subject to the 6.2% portion. For most field employees you'll never hit it; for foremen and project managers in higher-cost markets, it matters by Q4.

2. Federal unemployment tax (FUTA)

FUTA is 6.0% on the first $7,000 of wages, but most employers get a 5.4% credit for paying state unemployment on time, dropping the effective rate to 0.6% on the first $7,000 — $42/year per employee. It rounds to roughly $0.02/hr on a 2,080-hour year. Tiny, but it's there.

3. State unemployment tax (SUTA)

This one varies wildly. Most states price SUTA on the first $7,000–$50,000 of wages, with experience-rated rates between 0.5% and 8%+ depending on your claim history.

For a new or low-claim contractor:

Low-burden states (TX, FL, AZ, TN, GA): typically 0.5%–2.5% on a $7,000–$15,000 wage base. About $50–$200/year per employee.
Mid-burden states (NC, OH, IN, CO, NV): 1.0%–3.5% on a $7,000–$25,000 wage base. About $100–$500/year.
High-burden states (NY, NJ, MA, WA, HI, CA): 2.0%–5.5% on a $30,000–$70,000+ wage base. About $600–$2,500/year.

For a $52,000/year framer in a mid-burden state, budget roughly $300–$500/year, or about $0.15–$0.25/hr.

4. Workers' compensation insurance

The biggest single line-item swing in burden. Workers' comp is priced as a rate per $100 of payroll, by job classification code, by state, by your experience modifier (e-mod).

2026 typical rates by classification, mid-experience contractor:

Carpentry — finish/cabinet (NCCI 5437 / 5645 family): $3.50–$8.00 per $100 payroll.
Carpentry — framing/rough: $8.00–$16.00 per $100.
Roofing: $18.00–$45.00 per $100 — the highest-rate trade in residential.
Painting (interior): $3.50–$7.50 per $100.
Concrete (flatwork): $6.00–$12.00 per $100.
Drywall: $5.00–$10.00 per $100.
Electrical: $2.50–$6.00 per $100.
Plumbing: $3.50–$7.50 per $100.
HVAC: $3.50–$7.50 per $100.
Project manager / supervisor (NCCI 5606): $1.20–$3.50 per $100.

Multiply your e-mod (most established small contractors run 0.85–1.15) and add state-specific surcharges and assessments (CA's "second-injury" assessments alone can add 8–15%).

For a $25/hr framer (rough carpentry) in a typical state at $11.00/$100 with a 1.0 e-mod: $2.75/hr in workers' comp burden alone. For a $30/hr roofer at $28.00/$100: $8.40/hr — this is why roofing burden is dramatically higher than the rest of your trades.

5. General liability premium allocated to labor

Your GL policy is partly priced on payroll (and partly on revenue or square footage installed, depending on policy structure). For most contractor GL policies, the labor-attached portion runs 0.8%–2.5% of payroll. For a $52,000/year employee that's $420–$1,300/year, or roughly $0.20–$0.62/hr.

If your GL premium is rated on revenue rather than payroll (common for design-build firms), this line shifts to overhead instead of burden — but you still need to capture it somewhere. Don't double-count it.

6. Health insurance and employer-paid benefits

For contractors who offer benefits — and 2026 retention pressure means more residential GCs are offering them than ever — the employer cost of a basic health plan runs $450–$900/month per employee, or $5,400–$10,800/year. On a 2,080-hour year, that's $2.60–$5.20/hr.

Most small contractors handle this one of three ways:

Full employer-paid plan for foreman-and-up roles, no benefits for general field labor. Adds $4–$6/hr to burden for the covered tier.
Stipend in lieu of plan — a flat dollar amount added to gross wage to let employees buy their own coverage on the marketplace. This converts a benefits cost into a wage cost (which is then itself burdened on payroll taxes and workers' comp). About 6–10% more expensive than running a group plan, but administratively simpler for crews under five.
No employer contribution — increasingly hard to recruit and retain at this option in most markets.

If you offer benefits, model burden by tier (foreman vs apprentice) rather than as one company-wide rate.

7. Retirement contribution (if offered)

A SIMPLE IRA match at 3% of wages adds 0.75/hr on a $25 base. A SEP-IRA contribution scaled at 10% of wages adds $2.50/hr. Most field-labor-only contractors don't offer retirement; office staff and foremen often do.

8. Paid time off, holidays, sick leave, and training

This is the line item missed most often. Vacation, holidays, sick leave, and paid training time are hours the employee is paid but is not productively billing on a job. They convert annual paid hours into the smaller number of productive hours over which fixed costs (and burden) actually get recovered.

Typical breakdown for a 2026 residential contractor:

Holidays: 8 days × 8 hours = 64 hours/year.
Vacation/PTO: 5–10 days × 8 hours = 40–80 hours/year.
Sick leave (state-mandated minimums or company policy): 24–80 hours/year, depending on state.
Paid training, safety meetings, certification time: 16–40 hours/year.

Total non-productive paid hours: 140–260/year out of a 2,080-hour total. Productive hours fall to roughly 1,820–1,940.

This shifts the per-productive-hour math by 7–12%. We'll fold this into the final number below.

9. Vehicle, tools, phone, PPE, uniform, and per-employee allocation

Each field employee carries a stack of small per-person costs that don't show up on a paycheck:

Truck / van allocation (proportional share of a crew vehicle): $1,800–$5,000/year.
Tools and tool replacement: $400–$1,500/year for a journeyman.
Mobile phone stipend or company line: $300–$720/year.
PPE, boots, safety, uniforms: $250–$700/year.
Per-employee software seats (time tracking, payroll, training): $120–$360/year.

Total: $2,870–$8,280/year per field employee, or roughly $1.55–$4.50/hr.

Some contractors prefer to pull vehicles into overhead because they don't scale 1:1 with headcount. That's defensible — but if you do, you have to make sure your overhead allocation ends up high enough to recover them. Pick one place to put each cost. Don't double-count.

Putting It All Together: Burden by Trade, 2026

Below is a worked example for three trades in a typical mid-tax state (think NC, IN, CO), assuming basic benefits and a modest e-mod.

Framer / rough carpenter at $25/hr base

| Line item | Annual | Per hour (2,080 paid) | |---|---|---| | Base wages | $52,000 | $25.00 | | FICA + Medicare (7.65%) | $3,978 | $1.91 | | FUTA | $42 | $0.02 | | SUTA (mid-state, 2.5% on $15K base) | $375 | $0.18 | | Workers' comp (rough carp $11/$100) | $5,720 | $2.75 | | GL allocation to labor (1.5%) | $780 | $0.38 | | Health insurance (basic plan) | $7,200 | $3.46 | | PTO / holiday / sick (no extra cash, but reduces productive hours) | — | — | | Truck / tools / phone / PPE allocation | $4,500 | $2.16 | | Total burdened annual cost | $74,595 | $35.86 | | Productive hours (1,840) | — | $40.54/productive hour |

Burden as % of base wage: 43.4% when computed on paid hours, 62.2% when computed on productive hours. The first number is the one most contractors quote each other; the second is the one that actually has to come out of every hour you bill.

Roofer at $30/hr base

| Line item | Annual | Per hour (2,080 paid) | |---|---|---| | Base wages | $62,400 | $30.00 | | FICA + Medicare | $4,774 | $2.30 | | FUTA + SUTA | $475 | $0.23 | | Workers' comp (roofing $28/$100) | $17,472 | $8.40 | | GL allocation | $1,250 | $0.60 | | Health insurance | $7,200 | $3.46 | | Truck / tools / phone / PPE | $5,200 | $2.50 | | Total burdened annual cost | $98,771 | $47.49 | | Productive hours (1,820) | — | $54.27/productive hour |

Burden on a roofer: 58% on paid hours, 81% on productive hours. The workers' comp line alone is bigger than the SUTA-plus-FICA stack on the framer. This is why roofers must bill at materially higher rates than carpenters even when the base wage is similar — the load on the same dollar of labor is dramatically heavier.

Apprentice / general field labor at $18/hr base

| Line item | Annual | Per hour (2,080 paid) | |---|---|---| | Base wages | $37,440 | $18.00 | | FICA + Medicare | $2,864 | $1.38 | | FUTA + SUTA | $325 | $0.16 | | Workers' comp (mixed at $9/$100) | $3,370 | $1.62 | | GL allocation (1.0%) | $375 | $0.18 | | Health insurance (none) | — | — | | Truck / tools / phone / PPE | $3,200 | $1.54 | | Total burdened annual cost | $47,574 | $22.87 | | Productive hours (1,860) | — | $25.58/productive hour |

Burden on an apprentice without benefits: 27% on paid hours, 42% on productive hours. This is the floor — no benefits, low e-mod, mixed comp class. Most contractors should not be running a burden number lower than this.

The Bill Rate: From Burdened Cost to What You Charge

Burden gets you from base wage to fully-loaded cost per productive hour. It does not get you to your bill rate. That requires a second markup for overhead recovery and target net profit.

The right multiplier depends on:

Overhead as % of revenue. If your office, software, owner pay, marketing, and accounting cost you 20% of revenue annually, your overhead recovery multiplier on direct labor is roughly 1.25 (since overhead has to come out of all revenue, not just labor revenue).
Target net margin. A small residential GC targeting 8–12% net margin needs another 9–13% on top.
Whether you also bill materials with markup. If material markup contributes overhead recovery, your labor multiplier can be lower. If labor is your main markup vehicle, it has to carry more.

For a typical small residential contractor where labor and materials are billed roughly evenly with markup:

Burdened cost × 1.40 = floor bill rate (covers overhead, returns ~5% net).
Burdened cost × 1.55 = healthy bill rate (covers overhead, returns 10–12% net).
Burdened cost × 1.70+ = high-margin bill rate (specialized work, design-build, or sole expert in market).

Applied to the framer above (productive cost $40.54/hr):

Floor bill rate: $56.75/hr.
Healthy bill rate: $62.85/hr.
High-margin bill rate: $69/hr.

If you've been billing crew framing labor at $45–$50/hr because that's "what the market does," and your burdened cost is $40, you're working at 12% gross margin on labor and probably negative net after overhead. The market is wrong, or you're underpaying — those are the only two explanations.

State Adjustments

Burden is not flat across the country. The same $25/hr framer with the same benefits costs you measurably different amounts in different states.

Higher-burden states (add 4–9 percentage points to the framer example above):

California: high SUTA wage base ($46,800 in 2026), high workers' comp surcharges (8–15% on top of base rates), state disability insurance employer cost, paid family leave, and higher-than-average GL pricing. Total adder: +8 points.
New York: SUTA wage base $13,000 but high rate, state disability and paid family leave, NYC metro comp surcharge, mandatory sick leave. Total adder: +5 points.
Washington: state-run workers' comp (L&I) with hours-based premiums (not payroll-percentage), often higher than NCCI states for the same trade. Total adder: +4 points.
Hawaii, Massachusetts, Oregon: paid family leave, state disability, high SUTA rates. +3 to +5 points.

Lower-burden states (subtract 3–6 percentage points):

Texas: no state income tax (doesn't directly affect employer burden, but affects competitive wage pressure), opt-out workers' comp (some contractors use ERISA non-subscriber plans at 30–60% lower cost), low SUTA. Total reducer: -4 points.
Tennessee, Florida: no state income tax, low SUTA wage base, no state disability. -3 points.
Wyoming, South Dakota: lowest-burden states for residential contractors. -5 points.

If you operate in CA or NY and you've been borrowing a burden number from a friend in TX, you're 8–12 points light. If you operate in TX and you borrowed from a friend in CA, you're heavy and probably losing bids.

Reality Check on Productive Hours

The single most-cheated number in burden math is the productive-hours denominator. Contractors love to run it on 2,080 paid hours because the per-hour number looks better. The truth is harsher.

A reasonable productive-hours estimate for a residential contractor:

Start with 2,080 paid hours.
Subtract paid holidays (8 days × 8 hr = 64).
Subtract PTO/vacation (mean 60 hours/yr for crew).
Subtract paid sick leave (mean 40 hours/yr).
Subtract training, safety meetings, certification (mean 25 hours/yr).
Subtract weather/rain days for outdoor trades (varies — Phoenix carpenter loses 0; Seattle carpenter loses 80+).
Subtract drive time between jobs that's paid but not billable (mean 60–120 hours/yr depending on geography).

Net productive hours: typically 1,720–1,880 for an outdoor trade in a mid-weather market, 1,800–1,940 for indoor finish work.

If you bid against 2,080, you under-recover by 8–18%. Use the lower number.

The Subcontractor Comparison

A common contractor question: "Why don't I just sub everything out?"

Math comparison for 1,000 hours of framing labor on a year of work:

Self-perform (employee):

Wage cost: $25 × 1,000 = $25,000.
Burden cost: $25,000 × 43% = $10,750.
Total cost: $35,750.
Bill at 1.55x: $55,400.
Gross margin on labor: $19,650.

Sub out to a framing crew that quotes $48/hr:

Sub cost: $48 × 1,000 = $48,000.
GC markup at 18% (typical): $8,640.
Bill: $56,640.
Gross margin on sub: $8,640.

You make less per hour on subs, but you carry no payroll liability, no workers' comp exposure, no benefits administration, no PTO obligations, and no idle-time cost when work slows. The right answer depends on your volume — at high steady volume, self-perform wins; at low or seasonal volume, subs win because you're not eating idle hours.

This is why the largest residential GCs in most markets self-perform 1–2 trades and sub the rest. They self-perform what they have steady volume for; they sub what they don't.

Common Burden Mistakes

Quoting burden as "30%" without knowing what's in the 30%. Most contractors who say their burden is 30% are missing PTO impact, vehicle allocation, or both. Real residential burden in the US is rarely below 32% with benefits or below 28% without.

Using paid hours instead of productive hours. Inflates the bill rate's apparent margin by 8–18%. Real margin is on productive hours.

Ignoring workers' comp class differences. Pricing your roofer at the framer's burden rate. Roofing burden is double or more — ignoring this means you bid roofing jobs at framing margins.

Bidding subs at burdened cost. Subs already have their own burden baked into their quoted rate. You add a GC markup, not another burden layer.

Treating health insurance as overhead instead of burden. Health insurance scales with headcount, not with company existence. It's burden. If you put it in overhead, your overhead percentage is artificially high and your burden is artificially low — and you under-bill labor.

Not updating burden when workers' comp e-mod changes. Your e-mod recalculates annually based on claims experience. A bad claim year can swing your e-mod from 0.95 to 1.30, which adds 3–6 points to your burden overnight. Recompute every January.

Forgetting overtime burden. OT hours pay 1.5x wage but burden line items don't all scale 1.5x. FICA and FUTA do. Workers' comp does. Health insurance does not. Run a separate OT burden calc — it's lower as a percentage but higher in absolute dollars.

Pricing Discipline That Holds Up Under Pressure

The contractors who actually make money on labor have three habits:

They know their burden number to the half-percent, by trade and by season. They didn't borrow it from a friend or a forum thread; they computed it from their own payroll, comp policy, and benefits.
They price productive hours, not paid hours, and they have a documented productive-hours assumption (e.g., 1,840 for indoor trades, 1,780 for outdoor) that's used the same way on every bid.
They re-burden every January when workers' comp renews, e-mod recalculates, and SUTA rates re-issue. A 1.5-point change in burden across a 12-employee shop is $30,000+/year in unrecovered cost if you don't re-bid against the new number.

If you do those three things, labor stops being the line item that quietly bleeds your year. It becomes the most predictable margin source you have.

ProJobCalc Pro builds a live burden engine into every bid: trade-specific workers' comp lookups by state and class, an e-mod input that flows into every line, productive-hours math that backs out PTO and weather days, and a one-click re-burden when your January renewal numbers come in. If you're estimating jobs in a spreadsheet that's been carrying 2019 burden assumptions, you're losing thousands a year on every full-time crew member. Start a free trial — no card required, your first three bids run on the new burden engine.