Labor burden, also sometimes referred to as payroll burden or just burden, is the extra cost of labor in addition to an employee’s regular wages. Burden includes employer taxes, insurance, benefits, vacation time and any other un productive time that needs to be accounted for as a function of labor.
Burden does not include employee withholding, since they are deducted from the employees gross wages.
An alarming high percentage of small building and remodeling contractors don’t actually calculate their labor burden but instead just pick a number to arbitrary markup their wages to achieve a burdened cost based on what they think the “industry average” for burden is supposed to be or what they have heard so other contractor friend of their uses. Typicial industry markups on the average fall in a range from 1.12 to 1.30 but markups for burden in the range 1.5 to 1.8 and higher are fairly common too.
The danger in using an arbitrary “hearsay” markup number is no two companies are alike and what any one contractor covers in the way of burden, i.e. number of paid holiday, heath care costs, vehicle cost or tool allowances, and workers compensation insuracne will vary from contractor to contractor.