In Plain English
Quick Answer
All the extra costs of employing workers beyond their hourly pay, like taxes and insurance.
Definition
Definition
Labor burden is the total cost of employing a worker beyond their base hourly wage, including payroll taxes, workers compensation insurance, health insurance, retirement contributions, and other employee benefits. Estimators apply a labor burden rate of typically 25 to 45 percent of base wages when calculating labor costs in a bid. Ignoring labor burden leads to significant cost underestimates.
Context
Why It Matters in Bidding
Labor burden is one of the most common sources of bid losses or eroded margin, because base wage alone can understate true labor cost by a third or more once taxes, insurance, and benefits are added. Estimators must apply an accurate, current burden rate to every labor hour in the takeoff, since a stale or guessed rate compounds across thousands of hours and silently turns a profitable job into a losing one.
Example
Example
Pricing a concrete crew, the estimator multiplies the base journeyman wage by a 1.35 burden factor to capture payroll taxes, workers comp, and benefits, then carries that fully burdened rate against the labor hours from the takeoff.
See Also
Related Terms
FAQ
Questions Contractors Ask
What is included in labor burden?
Burden covers everything beyond the base wage: employer payroll taxes, workers compensation and general liability tied to payroll, health insurance, retirement and union fringe contributions, and paid time off. Some estimators also fold in small-tools and indirect supervision allowances. The exact mix varies by trade, state, and whether the workforce is union.
How do you calculate a labor burden rate?
Divide total annual burden costs for a worker by the base wages actually paid for productive hours, expressing the result as a percentage or multiplier. Estimators then apply that factor to base wages in the takeoff. Rates commonly fall in the 25 to 45 percent range but should be derived from a firm's own current numbers.
Why do estimators sometimes underestimate labor burden?
Common mistakes include using an outdated rate, omitting workers compensation differences between trades, ignoring rising health and insurance premiums, and forgetting that high-risk trades carry far higher comp modifiers. Because burden multiplies across every labor hour, even a few percentage points of error compounds into a serious shortfall on labor-intensive bids.
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