Enter worker roles, base wages, labor burden, overhead, and profit markup to instantly get fully burdened hourly rates, total project cost, client quote price, and gross margin — ready to submit a bid.
Office rent, admin salaries, insurance, tools, vehicles, software. Typical: 15–35% for contractors, 20–40% for engineering firms.
📈% on total cost
Desired net profit before tax. General contractors: 10–20%. Engineering/specialty: 15–30%. Higher risk = higher markup.
⚠️% of total cost
Buffer for scope creep, rework, delays, and unforeseen costs. Standard: 5–10% for routine projects, 10–20% for complex jobs.
Worker Roles (up to 5)
Each role's burdened rate = base wage × (1 + burden%). Total cost includes regular + overtime hours.
Results
Your Total Cost
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→
Client Quote Price
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=
Gross Profit
—
Avg Burdened Rate
—
weighted avg all roles
Avg Billable Rate
—
incl. overhead + markup
Gross Margin
—
profit ÷ quote price
Markup on Cost
—
profit ÷ total cost
Total Hours
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regular + overtime
Contingency
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included in quote
Quote Price Breakdown
Base WagesLabor BurdenOverheadProfit + Contingency
Role Breakdown
Role
Hrs
Base
Burdened
Role Total
Margin Advisory
How Contractor Labor Cost Is Calculated
True labor cost has four layers: base wages (what you pay the worker), labor burden (mandatory and voluntary employment costs on top), overhead (what it costs to run the business), and profit markup (your return for risk and expertise). Pricing only from base wages — the most common mistake — understates your true cost by 50–80% and quietly destroys project margins.
1 Base Wage
The hourly wage paid directly to the worker. For overtime hours, multiply by 1.5× under the U.S. Fair Labor Standards Act (FLSA). This is only the starting point of true labor cost.
Regular cost =
Wage × Reg. hours
Overtime cost =
Wage × 1.5 × OT hours
Total base =
Regular + Overtime
2 Labor Burden
The additional employer cost per worker beyond wages: FICA taxes (~7.65%), FUTA/SUTA unemployment insurance (~1–4%), workers' comp (~5–25% by trade), health insurance, retirement, and paid time off. Typical total burden: 25–40% of wages.
Costs of running the business that aren't tied to one project: office rent, admin staff, tools and vehicles, software, insurance, training, and marketing. Allocated as a % of direct labor cost. Typical contractor overhead: 15–35%.
Profit markup is applied to total cost (labor + overhead) to arrive at the client quote price. Gross margin is profit ÷ quote; markup is profit ÷ cost. These are different — a 20% markup equals a 16.7% gross margin.
Markup ≠ Margin — Know the Difference Before Bidding
Many contractors lose money because they confuse markup and margin. If your overhead + profit target is 20% of the quote (margin), you need to apply a 25% markup on cost — not 20%. The formula: Markup% = Margin% ÷ (1 − Margin%). For a 20% margin: 0.20 ÷ 0.80 = 25% markup. Always calculate your overhead and profit on top of fully burdened labor — never on base wages alone. And always add a contingency buffer (5–10%) before presenting a client quote. Scope creep alone on a mid-size engineering project can easily consume 3–8% of your labor estimate.
Base wages total $2,968 for 88 hours. Labor burden adds ~30% ($891). Overhead ($884) and 18% markup ($729) bring quote to $5,472 before contingency. Workers' comp for electricians typically runs 8–12% of payroll — one of the highest burden components.
Sr. Engineer at $85/hr burdened to $106/hr — making up 54% of total labor cost despite fewer hours than the field tech. Overhead at 30% reflects high software, vehicle, and equipment costs typical in civil engineering.
Overtime for the foreman at 35% burden adds significant cost. Carpenter pair at 33% burden: 2 workers doubles the impact of burden calculations. With 4 workers and 15% markup, total margin is 30% — industry standard for commercial fitouts in most U.S. metros.
Labor Burden Components — Reference Guide
Labor burden varies by trade, state, and benefit package. Workers' compensation rates vary dramatically by risk class — always use your actual classification rate from your insurer.
Burden Component
Employer Rate
Notes
Mandatory?
FICA — Social Security Federal
6.20% of wages
On first $168,600 of wages
Yes
FICA — Medicare Federal
1.45% of wages
No wage cap; +0.9% above $200K
Yes
FUTA — Federal Unemployment
0.60% (net)
On first $7,000 of wages after state credit
Yes
SUTA — State Unemployment
1.0–6.0%
Varies widely by state and experience
Yes
Workers' Compensation High Variability
5–25%+ of payroll
By trade class code — electricians ~8%, laborers ~12–20%
Yes (most states)
Health Insurance
5–15% of wages
Employer-paid portion of premiums
50+ employees (ACA)
Retirement / 401(k) Match
2–6% of wages
If offered — varies by company
No
Paid Time Off (PTO)
3–6% of wages
Vacation, sick leave, holidays paid not worked
Varies by state
Typical Total Burden Summary
25–40% of wages
30% is a common contractor benchmark
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FICA (SS + Medicare)
Rate7.65%
MandatoryYes — Federal
Workers' Comp
Rate5–25%+
Depends onTrade risk class
Total Burden
Typical range25–40%
Common benchmark30% of wages
Frequently Asked Questions
A fully burdened labor rate is the true cost of employing a worker for one hour — including base wages plus all employer-paid taxes, insurance, and benefits. A worker earning $40/hour may actually cost $52–56/hour when you add FICA, workers' comp, health insurance, and retirement contributions. If you price a project at $40/hour but your true cost is $54/hour, you're losing $14 for every hour worked. Over a 200-hour project that's a $2,800 loss before overhead. Always calculate your burdened rate — then add overhead and profit on top — to arrive at an accurate client quote.
Gross margin is profit expressed as a percentage of the selling price (revenue). Markup is profit expressed as a percentage of the cost. If your total cost is $10,000 and you quote $12,500, your profit is $2,500. Markup = $2,500 ÷ $10,000 = 25%. Gross margin = $2,500 ÷ $12,500 = 20%. A 25% markup equals a 20% gross margin — they are not interchangeable. Many contractors target a "20% margin" but accidentally apply 20% as a markup, resulting in only a 16.7% margin. Always agree internally on which metric you're using before calculating bids.
The most accurate approach is to calculate your total annual overhead expenses (office rent, admin salaries, vehicles, tools, software, insurance, training, marketing) and divide by your total annual burdened labor dollars. For most small contractors, overhead runs 15–25% of labor. For engineering firms with high software and equipment costs, 25–40% is common. Key rule: don't include labor-related costs in both your burden rate and your overhead — count each cost only once. A common mistake is including health insurance in burden AND in overhead, which double-counts it and inflates your bid.
Contingency covers scope changes, rework, unexpected site conditions, material price increases, and unforeseen complexity. Standard ranges by project type: routine maintenance jobs, 3–5%; commercial construction, 5–10%; complex industrial projects, 10–15%; first-time project type or high-risk environments, 15–20%. Contingency is different from profit — it's a risk buffer you may not spend. If unspent, it becomes additional profit. If you consistently under-spend contingency, reduce it on future bids to stay competitive.
Under the U.S. Fair Labor Standards Act (FLSA), non-exempt employees must be paid at least 1.5× their regular hourly rate for hours over 40 in a workweek. For cost estimation, apply the 1.5× multiplier to the base wage before adding burden — because most burden components (FICA, workers' comp) are also higher in overtime. A worker at $40/hr base costs $60/hr at OT rate, plus 30% burden = $78/hr fully burdened overtime. Always identify whether your project will require overtime before finalizing a bid — it can significantly impact profitability.
