Contractor Labor Burden Calculator
Your true labour cost is more than the wage: add payroll taxes, workers' comp, benefits, paid time off and per-hour allocations for insurance and equipment, then spread it over the hours you can actually bill. This free calculator turns a base wage into your real hourly cost, your burden percentage and the billing rate you need to hit your margin.
Annual cost of this employee: $0.00
Planning tool only — not payroll, tax or legal advice. Verify rates with your accountant.
Want your true costs built into every quote?
We build custom estimating systems that bake your real labour burden and overhead into every quote automatically, so your rates are right without the spreadsheet.
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Free · no signup · calculations stay in your browser — nothing you type is uploaded unless you send the separate contact form.
What this tool calculates
It converts a base wage plus your own burden percentages and annual costs into the true cost of an employee — per paid hour and per year — then divides by billable hours to show what each productive hour really costs. From there it gives your burden percentage, a break-even billing rate and a recommended rate that covers overhead and your target margin.
How the rate is built
Annual wage = base wage × paid hours. Add your burden percentages (payroll, workers' comp, benefits, vacation, stat holidays) plus annual dollar costs (insurance, tools, vehicle, training). Divide the total by billable hours — not paid hours — because you only earn on the hours you bill. Add overhead and divide by (1 − target margin) for a recommended rate. You enter every percentage; no province-specific rates are assumed.
- True hourly cost = total annual cost ÷ paid hours.
- Cost per billable hour = total annual cost ÷ billable hours.
- Recommended rate = (cost + overhead) ÷ (1 − target margin).
- You supply the percentages — this is a planning tool, not payroll or legal advice.
Worked example
An electrician pays a journeyman $30/hr. Add 26% in combined burden (payroll, comp, benefits, vacation, stat) plus $6,000/yr in insurance and truck costs, over 2,080 paid hours: the true cost is about $40.68/hr — a 36% burden. But only ~1,600 hours are billable, so each billable hour actually costs about $52.89. With 15% overhead and a 25% target margin, the recommended billing rate is about $81/hr — well above the $65 they were charging.
How to use it
- 1Enter the base hourly wage.
- 2Add your burden percentages: payroll, workers' comp, benefits, vacation, stat holidays.
- 3Add annual dollar costs (insurance, tools, vehicle, training) and paid vs billable hours.
- 4Set overhead and your target margin.
- 5Read your true cost, burden %, break-even and recommended billing rate.
Key takeaways
- An employee costs far more than their wage — often 25–40% more.
- Bill over billable hours, not paid hours, or you underprice every job.
- A wage-plus-a-bit rate is how contractors quietly lose money on labour.
Assumptions & limitations
- You enter your own percentages — no province-specific tax or comp rates are hardcoded.
- Billable hours are the productive hours you can actually invoice, always fewer than paid hours.
- This is a planning tool, not payroll, tax or legal advice — verify rates with your accountant.
Questions contractors ask
What is labour burden?
Labour burden is everything an employee costs beyond their wage: payroll taxes, workers' comp, benefits, paid time off, insurance and equipment allocations. Expressed as a percentage of the base wage, it's often 25–40% or more.
Why divide by billable hours instead of paid hours?
You pay for every hour but only earn on the hours you can bill. Spreading the full cost over fewer billable hours reveals the true cost you must recover in your rate — otherwise unbilled time comes out of profit.
Does this use Canadian payroll rates?
No rates are hardcoded. You enter your own percentages, so it works for any province or country. It's a planning tool — confirm exact rates with your accountant.
Is it free and private?
Yes. It runs in your browser with no signup, and nothing you enter is uploaded or stored.
Want your true costs built into every quote?
We build custom estimating systems that bake your real labour burden and overhead into every quote automatically, so your rates are right without the spreadsheet.