Calculate your labor burden to understand the true cost of employing your team beyond their hourly wage. Use this free labor burden calculator to estimate total labor burden rates, including taxes, insurance, and benefits.
Free Labor Burden Calculator
This free tool is built by Connecteam, the platform for managing your team.
How to Use the Labor Burden Calculator
- Enter the employee’s hourly wage.
- Input payroll tax rates for FICA, FUTA, and SUTA.
- Add monthly employee benefits like health insurance and retirement contributions.
- Include insurance premiums for general liability and workers’ compensation.
- Click calculate to see the total hourly labor burden and a full cost breakdown.
Labor Burden Calculator
Employee Costs
Results
Your total labor burden rate is
$0.00
Hourly Rate
Total Hourly Burden
$0.00
Cost Beyond Base Wage
Cost Breakdown
| Cost Component | Percentage / Rate | Calculated Cost ($/hr) |
|---|---|---|
| FICA (Social Security + Medicare) | 7.65% | $0.00 |
| FUTA | 0.6% | $0.00 |
| SUTA | 3.0% | $0.00 |
| Health Insurance | - | $0.00 |
| Retirement Contributions | - | $0.00 |
| General Liability Insurance | $4.00 / 1000 | $0.00 |
| Workers' Compensation | $15.00 / 100 | $0.00 |
What is Labor Burden?
Labor burden is the total cost your business incurs for retaining an employee, beyond their hourly pay. Sometimes called a burden rate or payroll burden, labor burden includes all mandatory and optional employer expenditures, including payroll taxes (FICA, FUTA, SUTA), insurances (workers’ compensation, general liability, etc.), and employee benefits (health, retirement, etc.).
To comply with federal and state laws, employers must pay specific taxes and insurance for each employee. These include:
- FICA (Federal Insurance Contributions Act): Covering Social Security and Medicare taxes, employers must match an employee’s contribution of 7.65% of gross wages, for a combined total of 15.3%.
- FUTA (Federal Unemployment Tax Act): Employers must pay federal unemployment tax at a rate of 6% on the first $7,000 of each employee’s annual wages. However, employers who qualify for a 5.4% tax credit pay a reduced FUTA rate of 0.6% per employee up to $7,000.
- SUTA (State Unemployment Tax Act): Also known as state unemployment insurance (SUI), this is a state-level tax employers must pay for each employee. The rates and wage thresholds vary by state and industry, though all employers must comply with their state’s requirements.
- Workers’ Compensation Insurance: This insurance covers employees injured on the job and is required for employers in all states except for Texas.
Learn more about state-specific Labor Laws and employer requirements here.
How to Calculate Labor Burden
Calculating labor burden is your way to understand the full cost of having an employee. Remember: when you pay an employee it isn’t just their hourly rate you’re covering. To get the full picture of your expenses, let’s calculate labor burden, starting with a simplified formula:
Hourly Labor Burden Rate = (Annual Wage + Annual Taxes + Annual Benefits + Annual Insurance) ÷ 2080
The number 2080 represents the standard amount of work hours in a year (40 hours × 52 weeks). To calculate annual labor burden, just remove the division step.
For example, if you hire a new field technician at $20 per hour, and the total cost of their taxes, insurance, and benefits adds up to $12,470.40 per year, their total annual cost is $54,070.40. Divide that by 2080, and their true hourly labor burden rate is $26 per hour.
Simplify Your Business Operations with Connecteam
Manually tracking employee hours, taxes, and labor costs can get complicated and lead to mistakes. Connecteam removes the complexity with a unified employee management app. With Connecteam, you can track time accurately with GPS geofencing, automate timesheets for payroll processing, and generate real-time reports to control your labor costs with confidence. Try Connecteam for free today!
FAQs
Labor burden represents the total additional costs associated with employing an individual beyond their base wage or salary. This includes taxes, insurance, benefits, and other overhead expenses. Understanding labor burden is essential for businesses because:
- It provides a clear picture of the true cost of each employee.
- Helps in project costing and ensures accurate pricing for services or products.
- Aids in budget planning and resource allocation, minimizing the risk of underestimating costs.
To use this calculator, you will need the following details:
- Hourly Wage: The base hourly wage paid to the employee.
- Tax Rates: FICA (Social Security and Medicare), FUTA, and SUTA percentages.
- Insurance Costs: Monthly costs for health insurance and rates for general liability and workers’ compensation insurance.
- Retirement Contributions: Monthly retirement contributions paid by the employer. This information ensures the calculations are as accurate as possible and reflective of your actual labor costs.
The calculator takes your input data and performs the following calculations:
- Hourly Labor Burden Rate: Combines the hourly wage with the costs of taxes, insurance, and benefits distributed on an hourly basis.
- Annual Labor Burden Cost: Multiplies the total hourly cost by the annual work hours (default is 2,080 hours for full-time employees). These outputs provide a comprehensive view of labor costs and help you understand where your money is being spent.
Yes, this tool is flexible and can be used for employees across different roles. Simply input the specific data for each employee or role and calculate individually. For example:
- For a senior employee with a higher hourly wage and additional benefits, enter those details.
- For part-time or contract workers, adjust the hourly rate and exclude benefits not applicable to them.
Yes. The calculator is fully customizable. You can enter your own FICA, FUTA, SUTA, and insurance rates, which vary by state and company. This makes the tool accurate for your specific location.
No. Labor burden usually covers predictable, recurring costs such as taxes, benefits, and insurance. Overtime and bonuses should be calculated separately, as they vary by employee and situation.
Yes! Just adjust the hourly wage and plug in monthly or prorated benefits, insurance, and taxes. The calculator will give you an accurate hourly cost for any employee type.
Connecteam helps businesses reduce labor costs by improving time tracking accuracy, automating payroll reporting, and preventing buddy punching or time theft with features like geofencing. You’ll gain real-time visibility and eliminate unnecessary labor expenses.