Guide · 2026
Labor burden rate
Your labor burden rate is everything an employee costs you beyond their base wage — payroll taxes, insurance, and benefits — expressed as a percentage of that wage. It turns a salary into the number you actually budget.
The formula
Labor burden rate (%) = (Total employer costs − Base wages) ÷ Base wages × 100
Fully-burdened labor rate ($/hr) = (Base wages + Employer costs) ÷ Hours worked
"Employer costs" is the burden stack: employer Social Security (6.20% up to $184,500), Medicare (1.45%), federal unemployment (FUTA), state unemployment (SUI), any state-specific employer taxes, workers' compensation, and — if you include them — benefits like health insurance and a retirement match.
A worked example
Take a $60,000 salary. In a no-SUI-frills, low-tax state like Texas, mandatory employer taxes plus an office workers'-comp estimate add $4,920 — a labor burden rate of 8.2%, for a fully-burdened cost of $64,920 ($31.21/hour). The same salary in California carries a 8.5% burden ($65,111) — the gap is almost entirely state unemployment and state-specific taxes. Add benefits and the burden typically climbs another 25–35 points.
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How the $6,079 on top of salary breaks down
- Social Security76%
- Medicare18%
- FUTA1%
- State SUI4%
- Workers' comp1%
| Base salary | — | $75,000 |
| Social Security (employer) | 6.20% up to $184,500 | $4,650 |
| Medicare (employer) | 1.45% (no cap) | $1,088 |
| FUTA | 0.60% on first $7,000 | $42 |
| State unemployment (SUI/TX) | 2.70% up to $9,000 | $243 |
| Workers' compensation (est.)est. | ~0.08% (office/clerical est.) | $56 |
| Total cost | $81,079 |
Estimate for budgeting, not tax advice. SUI uses the new-employer rate; workers' comp is an adjustable office-class estimate. See methodology.
Why it matters
Contractors who bid off base wages alone lose money on every hour. A correct labor burden rate is the difference between a job that looks profitable and one that actually is — and it's the basis for pricing, quoting, and headcount planning. Construction and field-service firms especially need it per-trade, because workers' comp swings the burden hard by job class.
See the full model and exclusions in our methodology, or the cost in a specific state from the calculator. Every rate is sourced.