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Margin One
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Free contractor tool

What does an hour of labor actually cost you?

The wage on the paycheck is the smallest part of the number. Add payroll taxes, workers’ comp, benefits, and the truck — then divide by the hours you can actually bill, not the hours you pay for. That figure is what every price you quote has to clear.

Fully loaded labor cost is what one productive hour of an employee costs your business: total annual employment cost ÷ productive hours. Annual cost is wage plus payroll taxes, workers’ comp, benefits, and labor-related overhead. Productive hours are paid hours minus PTO, holidays, training, and other non-billable time. A technician paid $35/hour typically costs far more than $35 per billable hour once both adjustments are made — which is why pricing off the wage quietly loses money on jobs that look profitable.

What this employee costs you

Every field is an editable assumption — start with your own numbers. Nothing is submitted and no email is required.

Pay basis
$ / hr

The hourly rate on the paycheck.

hrs / yr

Every hour you pay for, including PTO and holidays. 2,080 = 40 hrs × 52 weeks.

% of wage

Your rate — FICA, FUTA, and SUTA vary by state and year.

% of wage

Your class-code rate; trade and state change it substantially.

$ / yr

Employer-paid portion only.

$ / yr

Truck, fuel, tools, phone, uniforms — anything that follows the person.

Paid, but not productive

hrs / yr
hrs / yr
hrs / yr
hrs / yr

Shop time, drive time, admin — paid hours you can't bill to a job.

%

Margin is a share of price, not a markup on cost.

Fully loaded labor cost

$71.20 / hr

You pay $35.00/hr. Each productive hour actually costs $71.20 — 2.03× the wage.

Total annual employment cost$99,104

Wage $72,800 + payroll taxes and workers' comp $13,104 + benefits $7,200 + other overhead $6,000.

Burden on top of wage36%

Everything you pay beyond the wage itself, as a share of the wage.

Productive hours1,392 hrs

688 hrs of the 2,080 hrs you pay for are not billable — that's 67% utilization.

Minimum billable rate at 50% margin$142.39/hr

That is a 100% markup over the $71.20 cost — margin and markup are not the same number. Bill below this and the hour loses money before overhead.

Book a CallOne conversation. Your actual numbers.
How we compute this
  • Total annual cost = wage + (payroll tax % + workers’ comp %) × wage + benefits + other labor overhead.
  • Productive hours = paid hours − PTO − holidays − training − other non-productive hours.
  • Fully loaded hourly cost = total annual cost ÷ productive hours.
  • Minimum billable rate = loaded cost ÷ (1 − target margin %).
  • Every default is an editable assumption, not an industry average. Statutory rates vary by state, class code, and year — use yours. This is a planning tool, not tax, accounting, or legal advice.

The math

How the number is built

Three steps, in order:

  1. Total annual employment cost = base wage + (payroll tax % + workers’ comp % × wage) + employer-paid benefits + labor-related overhead.
  2. Productive hours = annual paid hours − PTO − holidays − training and meetings − other non-billable hours.
  3. Fully loaded hourly cost = total annual employment cost ÷ productive hours. To price it: minimum billable rate = loaded cost ÷ (1 − target margin %).

Worked example: a service technician

Illustrative figures to show the mechanics — not benchmark data, and not a claim about what your shop should see.

Worked example converting a $30 hourly wage into a fully loaded hourly cost
Base wage$30/hr × 2,000 paid hrs$60,000
Payroll taxes + workers' comp15% of wage$9,000
Benefits (employer share)health + retirement$6,000
Total annual employment costwage + burden$75,000
Non-productive hoursPTO 200 + holidays 100 + training 200500 hrs
Productive hours2,000 − 5001,500 hrs
Fully loaded hourly cost$75,000 ÷ 1,500$50.00/hr
Minimum rate at 50% margin$50.00 ÷ (1 − 0.50)$100.00/hr

The wage was $30. The cost is $50. The price at a 50% margin is $100 — a 100% markup, not a 50% one.

Wage, burdened, loaded, billable — four different numbers

Wage
What the employee is paid per hour. The smallest number.
Burdened cost
Wage plus employer costs — payroll taxes, workers’ comp, benefits — usually quoted as a percentage on top of wage.
Fully loaded cost
Burdened annual cost spread over productive hours only. This is your true cost per billable hour.
Billable rate
What you charge. It must exceed the loaded cost by enough to cover overhead and profit — loaded cost ÷ (1 − target margin).

Assumptions and limits

  • Every default in the calculator is an editable starting assumption, not an industry average or survey result. Replace them with your payroll and insurance figures.
  • Payroll tax, workers’ compensation, and benefit costs vary by state, class code, headcount, and year. There is no single correct national rate.
  • This is a planning tool for pricing decisions — not tax, accounting, or legal advice.
  • It models one employee at a time. Crew pricing, overtime premiums, and prevailing-wage work need additional handling.
  • Last reviewed 2026-08-15.

Common questions

Loaded labor cost — FAQs

How do you calculate fully loaded labor cost?
Add every employer cost for the year — base wage, payroll taxes, workers' compensation, benefits, and labor-related overhead like a truck and tools — then divide that total by the hours the person is actually productive, not the hours you pay for. Formula: fully loaded hourly cost = total annual employment cost ÷ productive hours. Productive hours are paid hours minus PTO, holidays, training, and other non-billable time.
What is the difference between burdened and loaded labor cost?
Burdened cost adds employer costs on top of the wage — payroll taxes, workers' comp, benefits — and is usually quoted as a percentage of wage. Fully loaded cost goes one step further and spreads that burdened annual cost across only the hours you can actually bill. Burden alone understates the number, because you pay for PTO, holidays, training, and shop time that no customer ever pays for.
What is a fully burdened labor rate?
It is the hourly figure that includes wage plus every employer cost, before any profit. It is a cost, not a price. The rate you charge has to sit above it by enough to cover overhead and your target margin, which is why this calculator also shows the minimum billable rate at the margin you choose.
Is a 50% margin the same as a 50% markup?
No, and confusing them is the most expensive arithmetic error in contracting. Margin is a share of the price; markup is a share of the cost. A 50% margin on a $50 cost means a $100 price — which is a 100% markup. Charging a 50% markup instead gives you $75, a 33% margin, and a quiet shortfall on every hour sold.
What burden percentage should contractors use?
Use your own. Payroll tax rates, workers' compensation class codes, and benefit costs vary by state, trade, and year, so any single national number would be wrong for most shops. The calculator ships with editable starting assumptions, not industry averages — replace them with figures from your payroll provider and insurance declarations page.

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