The hourly wage you pay for labor isn't your hourly labor cost. Your
total "labor burden" also includes payroll taxes, insurance, and
employer-paid benefits like sick, vacation, holiday, and union benefits.
The table below is an example of a more accurate assessment of true labor
cost. Percentages in the second column are percentages of the hourly wage (the
percentages for your locale may vary from the example here).
Labor, Hourly Rate $20.00
Workers Comp (5-54%) 13.20% 2.64
Liability Insurance 3.50% 0.70
Medicare Taxes 1.45% 0.29
Social Security 6.20% 1.24
Unemployment, State 3.70% 0.74
Unemployment, Federal 0.80% 0.16
Union Benefits 10.00% 2.00
Medical Insurance $50/mo. 0.30
Total rate per hour $28.07
The workers compensation rate for each employee will vary depending on their
workers compensation classification, which is based on the type of work the
employee performs. If you create your own table like the one above, and the
employee has two or three classifications, then you would average those rates
and use the average workers compensation rate in the table.
Your liability insurance is based on the rate your insurance carrier has
given you for payroll. Not all liability insurance is based on payroll; some of
it may be based on your gross receipts.
If you offer sick, holiday, or vacation pay, then you would need to add
those categories to the table above.
In the example above, the labor rate for someone making $20 per hour ends up
costing $28.07 per hour when labor burden is included. This is why it is
extremely important to
include labor and labor
burden in your job cost reports. If either gets left off, your job will
look more profitable, which will be misleading to the estimator, owner, and