What percentage does labor burden typically add to total labor costs?

Labor burden typically refers to the additional costs that a contractor incurs beyond the direct wages paid to employees. These costs can include payroll taxes, benefits (such as health insurance and retirement contributions), workers’ compensation insurance, and other overhead expenses associated with employing workers.

A common estimate for the labor burden as a percentage of total labor costs ranges between 20% to 30%, depending on the specific practices and benefits offered by the employer. When considering the higher end of this range, 30% is a typical benchmark used in the construction industry and reflects the comprehensive costs associated with hiring and maintaining a workforce.

This understanding of labor burden helps contractors more accurately calculate total project costs, ensuring all expenses are accounted for when determining bids and managing budgets. By incorporating an appropriate labor burden percentage, contractors can enhance their financial planning and labor cost management.