Labor Cost Calculator
Enter employee count, regular hours, hourly wage, payroll burden rate, and optional overtime to calculate base wages, burden cost, overtime cost, total labor cost, and effective hourly labor cost — the real cost of each hour worked after all overhead.
Enter your labor inputs
Useful for job pricing, staffing budgets, shift planning, service quotes, and operating margin analysis. Payroll burden includes taxes, benefits, insurance, and other overhead tied to labor.
Want to understand the formula in depth?
What is labor cost?
Labor cost is the full expense of employing people — not just the wage. It includes base wages plus payroll taxes, employer-side benefits, workers' compensation, and any other overhead directly tied to having workers on the payroll. This calculator captures that full picture through the payroll burden rate.
In many businesses, labor is the single largest operating expense. Pricing jobs or budgets using wage rate alone consistently understates true costs — sometimes by 20–40%.
Labor cost formula
Burden is applied to base wages only in this calculator. Some models apply burden to overtime as well — adjust your burden rate up slightly to approximate that if needed.
How to use this calculator
- Enter the number of employees in the job, shift, or pay period.
- Add regular hours worked per employee.
- Enter the hourly wage rate.
- Add your estimated payroll burden percentage.
- Optionally enter overtime hours per employee and select the overtime multiplier.
- Click Calculate to see the full labor cost breakdown.
Example calculation
Standard crew preset — 5 employees · 40 reg hrs · $22/hr · 18% burden · 5 OT hrs at 1.5×:
- Base wages = 5 × 40 × $22 = $4,400
- Burden cost = $4,400 × 18% = $792
- Overtime cost = 5 × 5 × $22 × 1.5 = $825
- Total labor cost = $4,400 + $792 + $825 = $6,017
- Total hours = 5 × (40 + 5) = 225 hrs → Effective hourly cost = $26.74/hr
The $26.74 effective hourly cost is $4.74 above the base $22 wage — a 22% gap that grows further with a higher burden rate or more overtime.
What is payroll burden?
Payroll burden (also called labor burden or on-cost) is the collection of employer-side costs on top of gross wages. It typically includes:
- Employer payroll taxes — FICA (7.65%), FUTA, SUTA
- Workers' compensation insurance — varies by industry and risk class
- Health and dental benefits — employer-paid premiums
- Retirement contributions — 401(k) match, pension
- Paid time off — vacation, sick leave, holidays
- Other overhead — uniforms, training, tools, safety equipment
A typical US burden rate ranges from 18% to 35% depending on benefit levels and industry. The standard preset uses 18%; the labor-intensive preset uses 25%.
FAQ
What is included in payroll burden?
Payroll burden typically includes employer payroll taxes (FICA, FUTA, SUTA), workers' compensation, health and dental benefits, retirement contributions, paid time off, and other labor-related overhead. A typical US burden rate is 18–35% of base wages.
What is the effective hourly labor cost?
Effective hourly labor cost is total labor cost (base wages + burden + overtime) divided by total hours worked. It shows the real cost per productive hour — the number you should use in job quotes, bid pricing, and unit cost models rather than the base wage rate.
Should I include overtime in labor cost estimates?
Yes, if overtime is a regular part of your workflow. Overtime raises the blended hourly rate significantly. If overtime is routine rather than occasional, it is often more cost-effective to add a worker than to pay persistent overtime premiums.
Does this calculator work for a single employee?
Yes — set the employee count to 1 and the calculator estimates labor cost for a single worker. This is useful for freelance rate-setting, contractor pricing, and individual employee cost reviews.
Why is effective hourly cost higher than the wage?
Because it includes the full employer cost — not just the base wage. Even without overtime, the burden rate alone adds 18–35%. Add overtime hours and the blended cost rises further. This gap is why many businesses that price at wage rate alone end up with thinner margins than expected.
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Disclaimer
This calculator is for educational and planning purposes only. It does not provide accounting, legal, tax, or payroll advice. Actual labor costs vary by jurisdiction, overtime law, benefits structure, workers' compensation rates, and company-specific policies.