Labor Cost Calculator

Calculate what an hour of construction labor really costs after payroll taxes, workers compensation, benefits and unbillable time, and the rate you have to bill to cover it.

By CalcBuilt Editorial TeamUpdated September 9, 2026Formulas checked against manufacturer specs, see how we calculate.

Quick answer: To find the real cost of labor, add payroll taxes, workers compensation and benefits to the wage, spread the year's cost over billable hours only, then add overhead. A $28 wage costs $50.85 per billable hour and has to bill at $68.65 with a 35% markup.

Your measurements

Plan view from above: area is length times width.

Base hourly wage$What lands on the paycheck before anything else. BLS publishes median wages by trade and state, and a helper runs well below a licensed journeyman.Payroll taxes%The employer half of FICA is 7.65 percent, 6.2 for Social Security and 1.45 for Medicare. Add roughly 1 percent for federal and state unemployment on a good rating.Workers compensation (dollars per $100 of payroll)The rate is per $100 of payroll and swings by trade and state: finish carpentry can be under $6, framing and roofing often $20 to $40. Your policy declarations page has the exact class rate.Benefits per hour$Health insurance, retirement match, tool allowance and phone, divided by paid hours. Skip it for a subcontractor, who carries their own.Paid hours per year2,080 is a 40 hour week for 52 weeks. Reduce it only if the position is part time; paid time off stays in this number because you pay for it.Billable hours per yearPaid hours minus vacation, holidays, training, shop time, drive time and rain days. 1,700 out of 2,080 is an 82 percent utilization rate, which is realistic on residential work.Overhead on labor%General liability, vehicle, small tools, supervision and office cost, expressed against labor. Track your own; 10 to 20 percent is common on a small crew.Markup for profit%Markup, not margin. A 35 percent markup on cost is a 26 percent gross margin. To hit a 40 percent margin you need a 67 percent markup.Hours on this job (optional)Enter the hours you estimated for a specific job to price it. Leave at 0 for the hourly figures only.

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Results

Burdened cost per billable hour: $50.85; $28.00 wage becomes $50.85, a 1.82x multiplier, at 82% utilization
Rate to bill: $68.65; 35% markup on cost, which is a 26% gross margin
Cost per paid hour: $37.78; $28.00 wage + $2.42 taxes + $3.36 comp + $4.00 benefits, before overhead
Annual cost of this person: $78,587; 2,080 paid hours, of which 1,700 are billable
Price a job: Enter hours; Every hour you sell at $68.65 returns $17.80 of gross profit toward fixed overhead

Labor Cost formula

Cost per paid hour = Wage + Wage x Payroll tax % + Wage x Comp rate % + Benefits per hour
Annual cost = Cost per paid hour x Paid hours
Burdened cost per billable hour = Annual cost / Billable hours x (1 + Overhead %)
Bill rate = Burdened cost x (1 + Markup %)

Worked example

A roofing crew member at $32 an hour in a state where the roofing class rate is $28 per $100 of payroll. Taxes at 8.65 percent add $2.77, comp adds $8.96, and $3 an hour of benefits brings the cost per paid hour to $46.73.

Roofing loses more days to weather, so call it 1,500 billable hours out of 2,080 paid. The annual cost is $97,194, which is $64.80 per billable hour, and 15 percent overhead takes it to $74.52. At a 35 percent markup the crew member has to bill at $100.60 an hour, more than three times the wage on the paycheck.

Quick reference

Burdened cost and bill rate at 1,700 billable hours, 10 percent overhead and 35 percent markup
Base wage	Comp rate	Burdened cost	Bill rate
$20	$8 per $100	$36.78	$49.66
$28	$12 per $100	$50.85	$68.65
$32	$28 per $100	$64.24	$86.72
$40	$12 per $100	$70.34	$94.95
$60	$6 per $100	$97.97	$132.26

Why the wage is never the cost

Four things sit between a paycheck and what an hour of work actually costs. Payroll taxes are the smallest and the most predictable: 7.65 percent for the employer half of FICA, plus about a point for unemployment. Workers compensation is the one that swings, because it is priced per hundred dollars of payroll against a class code, and a roofing code can be five times a finish carpentry code in the same state.

Benefits are a flat add per hour if you offer them. The fourth item is the one that catches people: unbillable time. You pay for 2,080 hours a year and sell maybe 1,700 of them, because holidays, vacation, training, shop cleanup, drive time between stops and weather all come out of the same year. Dividing the annual cost by billable hours instead of paid hours is what turns a $28 wage into a $46 cost before overhead has been touched.

From cost to a bill rate

Overhead comes next: general liability, the truck, small tools that walk off, supervision, and the office. Expressed against labor it usually runs 10 to 20 percent on a small residential crew. Add it and you have the number the job actually costs you, which is the number a bid must never fall under.

Profit is a markup on that cost, and markup is not margin. Multiplying cost by 1.35 gives a 35 percent markup, which is a 26 percent gross margin because the profit is measured against the higher selling price. Contractors who want a 40 percent margin need a 67 percent markup. Getting this backwards is the most common arithmetic mistake in residential bidding, and it shows up as a busy year with no money at the end of it.

What this calculator leaves out

Fixed overhead that does not scale with labor, such as rent, insurance on the building, software and the owner's salary, which a full overhead recovery model spreads across all jobs rather than each hour. It does not handle prevailing wage or Davis-Bacon jobs, union fringe packages, per diem and travel, overtime at time and a half, or the Social Security wage base cutting off mid-year on a high earner. Subcontracted labor is different again: the sub carries their own burden and you mark up their invoice instead.

Mistakes that cost money

Bidding at the wage plus a round number. A $28 wage with a $10 add is $38 against a real cost near $51.
Spreading the year over 2,080 hours. You pay for holidays and rain days but cannot bill them, so divide by billable hours only.
Confusing markup with margin: 35 percent markup is 26 percent margin, and quoting margin as markup silently cuts profit.
Using one comp rate for the whole crew. The class code follows the work, and a roofer costs several times a trim carpenter.
Leaving out drive time and shop time on a residential job with three stops a day; that alone can be 10 percent of the week.
Forgetting the Social Security wage base stops mid-year on high earners, so a flat 7.65 percent overstates their cost late in the year.

Key facts

The employer half of FICA is 7.65 percent of wages, 6.2 for Social Security up to the annual wage base and 1.45 for Medicare with no cap.
Workers compensation is quoted per $100 of payroll and varies by trade and state, from under $6 for finish carpentry to $20 to $40 for roofing.
Burdened labor commonly lands between 1.5 and 2.2 times the base wage once taxes, insurance, benefits and unbillable time are counted.
A 35 percent markup is a 26 percent gross margin. Markup and margin are different numbers and mixing them is how contractors lose money.
Utilization matters more than most inputs: dropping from 1,900 to 1,500 billable hours raises the cost per hour by about 27 percent.

Frequently asked questions

What is a burdened labor rate?

The wage plus payroll taxes, workers compensation, benefits and overhead, spread over the hours you can actually bill. It commonly lands between 1.5 and 2.2 times the base wage, so a $28 wage costs around $51 an hour.

How much should a contractor charge per hour?

Enough to cover the burdened cost plus a markup. At a $28 wage with typical burden that is about $51 of cost, so a 35 percent markup bills at roughly $69 an hour. Higher risk trades and lower utilization push it well past that.

What is the difference between markup and margin?

Markup is a percentage of cost, margin is a percentage of the selling price. A 35 percent markup gives a 26 percent margin. To reach a 40 percent margin you need a 67 percent markup.

How many billable hours are in a year?

About 1,500 to 1,900 out of 2,080 paid hours on residential work, depending on trade and weather. Holidays, vacation, training, shop time and drive time all come off the top.

Sources and references

Occupational Employment and Wage Statistics, construction trades wages (US Bureau of Labor Statistics)
OES data tools for wages by occupation and state (US Bureau of Labor Statistics)
Davis-Bacon wage determinations for construction (US General Services Administration)

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