Have you ever looked at your schedule and asked, “If we’re so slammed, why do the numbers feel so tight?” If so, then labor burden is most likely the missing piece. Most contractors know what they pay their crew per hour. Fewer know what that hour truly costs once you add payroll taxes, workers comp, paid time off, training, and the hidden time that never shows up on an invoice. That gap is where profit quietly disappears.
Labor burden is the full cost of employing your team beyond the hourly wage. When you price a job using wages only, you undercharge by default. The job might look profitable on paper, but the season ends and the bank account tells a different story.
What Labor Burden Includes
Start with the obvious number – hourly wage. Then add every cost associated with that employee. This includes:
- Payroll taxes: Employer side Social Security and Medicare, plus any state payroll taxes.
- Workers compensation: Your rate depends on your state and classification codes, but it is still a real cost.
- Unemployment insurance: Federal and state unemployment costs.
- Benefits: Health insurance contributions, retirement matches, stipends, and any perks you provide.
- Paid time off and paid holidays: You pay for hours that are not billable.
- Training and onboarding: New hires are not fully productive on day one, and that ramp time is expensive.
- Non billable time: Morning load up, jobsite travel, pickup runs, shop cleanup, callbacks, rain delays, and “quick favors” that do not get tracked.
A Simple Example That Exposes The Problem
Let’s say you pay a crew member $25 per hour and you bid jobs assuming labor costs $25. On a 200 hour month for that employee, wages total $5,000. But the full cost is higher.
If your burden adds 30 percent, the true monthly cost is $6,500. That is $1,500 you must recover through pricing and job performance. Multiply that by three crew members and you are short $4,500 per month. That is not a small leak. That is a profit killer.
If you are thinking, “My burden is not 30 percent,” you might be right. It could be 20 percent or it could be 60 percent depending on comp rates, benefits, and how much non billable time you carry. The point is that it is never zero.
Why Contractors Miss Labor Burden
You are busy, your numbers are scattered, and the industry teaches shortcuts. “Use this markup.” “Charge this per square.” “Stay booked out.” Those rules can keep you alive for a while, but they rarely keep you profitable on purpose.
One more trap is treating your best installer as “free overhead.” If you jump on the tools, your time still has a cost. When you do not price that cost, you are stealing profit from the company to subsidize the bid. That habit compounds across a season. And it feels normal.
The Most Expensive Part Is Non Billable Time
Most owners focus on taxes and workers comp, but non billable time is where the math gets brutal. If your crew is paid for 40 hours a week but only produces 28 billable hours, your labor cost per billable hour jumps fast.
Here is the reality: you do not sell paid hours. You sell billable hours. When billable hours drop, every labor cost gets spread across fewer revenue hours. That is why two companies can pay the same wage and get totally different results. The difference is utilization, tracking, and pricing discipline.
How To Calculate Labor Burden Without Getting Stuck
You do not need a perfect spreadsheet to get started. You need a usable number you trust.
- Gather your annual wage totals for field labor.
- Add annual employer payroll taxes, workers comp, unemployment, and benefits tied to those employees.
- Add paid time off costs. A quick way is to estimate PTO hours as a percent of paid hours.
- Estimate non billable time as a percent of paid time. Be honest. Include travel, load up, and shop time.
- Divide the total annual labor cost by total annual billable hours.
That final number is your true cost per billable hour before you make profit. Once you know it, you can price with confidence instead of hope.
What To Do With The Number
Your cost per billable hour is not your rate. It is your floor. Above that floor you still need overhead recovery and profit.
This is where a system matters. When you set a profit goal first, you can reverse engineer the rate you need to charge. You stop guessing. You stop winning jobs that drain you.
Labor burden is also a decision tool. If your burden is high, ask better questions.
Are we carrying too much travel time because our schedule is scattered? Are we underpricing small jobs that steal prime calendar space? Do we need better job plans so crews are not waiting on materials?
When you track labor against budgets, these answers show up fast. When you do not, they stay invisible.
Where Elevation Advisor Fits In
Labor burden becomes useful when it connects to your proposals, job budgets, and actual job performance. Elevation Advisor is built for that connection. You define goals, calculate what you need to charge, and run proposals and projects through numbers that reflect reality.
If you already know your burden, great. Plug it into your pricing assumptions and build proposals that protect your margins.
If you do not know it yet, this blog is your nudge. Calculate it. Then build a pricing system that keeps you accountable.
You can work hard and still lose money if you price jobs like labor is only a wage. When you price with labor burden in mind, your work finally starts paying you back.
Next step
If you’re ready to stop guessing and start pricing with real numbers, Elevation Advisor can help. Join a group demo to see how Profit Genie, proposals, and job tracking work together to protect your margins and keep your crew hours profitable. To learn more, visit elevationadvisor.com, call (509) 240-3400, or book your group demo here.
