Labor Burden for Electrical Contractors
An employee paid $35 an hour costs more than $35 an hour to employ. Labor burden is the employer cost added to wages. Your selling rate must also recover nonbillable time, overhead and your planned margin.
Separate wage, burden and billable efficiency
Base wage is pay per paid hour. Burden adds employer payroll taxes, workers compensation and benefits. Loaded labor cost is wage plus burden. Billable efficiency is billable hours divided by paid hours. These are different inputs. Classify tools, training, paid leave and similar costs consistently so no expense is included twice. If annual wages already include paid leave, do not add the same wages again as an extra cost.
Calculate cost per billable hour once
Method A: divide total annual employment cost by expected annual billable hours. Method B: divide total annual employment cost by paid hours, then divide that loaded hourly cost by billable efficiency. These methods are equivalent when the inputs match. Do not divide by billable hours and then adjust for efficiency again.
Include owner time and avoid overlap
For owner field labor, use a realistic wage equivalent and consistent treatment of employer costs. Recover estimating and administration either through your labor-time assumptions or overhead, not both for the same time. Add overhead separately after establishing the labor cost per billable hour.
Frequently asked questions
What is a typical labor burden percentage?
There is no single rate for every shop. Calculate yours from actual employer costs, benefits and paid hours.
Is labor burden overhead?
They are separate cost categories in this model. Allocate each expense once.
Should owner field time be included?
Yes. Time has an economic cost even when the owner does not take an hourly wage.
How does this affect margin?
Understated labor costs make a quoted margin look better than it is.
Use the free checklist to review your inputs. The $79 downloadable Excel Profit & Pricing System brings wages, burden, efficiency and overhead into job pricing.