Your True Hourly Rate: How to Calculate Burdened Labor Cost

If you price jobs off what you pay your techs per hour, you are underpricing — often badly. The wage on the paycheck is only a fraction of what an hour of that technician's time actually costs your business. The real number is called burdened labor cost, and it is the foundation of accurate pricing and job costing.

Why the wage is not the cost

An employee who earns $30/hour does not cost you $30/hour. On top of the wage you pay payroll taxes, workers' compensation, liability insurance, benefits, paid time off, and training — plus all the hours you pay for that are not billable. Add it up and the true cost is frequently 40–70% higher than the base wage.

What goes into burdened labor cost

• Base wage: the hourly rate you pay.
• Payroll taxes: employer-side Social Security, Medicare, and unemployment.
• Workers' comp and liability insurance: often a meaningful percentage in the trades.
• Benefits: health insurance, retirement contributions, bonuses.
• Paid non-working time: PTO, holidays, sick days.
• Non-billable hours: shop time, training, driving without a billable destination, warranty callbacks.

The two-part calculation

Part 1 — annual cost. Add the wage plus every burden above to get the total annual cost of employing the technician. Say a $30/hour tech (about $62,400/year at 2,080 hours) carries another $20,000 in taxes, insurance, and benefits — a total of roughly $82,400.

Part 2 — billable hours. Of the 2,080 paid hours in a year, a field tech rarely bills more than 1,300–1,500 after vacation, training, drive time, and slow days. Divide total cost by billable hours, not paid hours:

1. $82,400 ÷ 1,400 billable hours = about $59/hour burdened cost.
2. That same tech "costs $30/hour" on paper — nearly double in reality.

Why billable hours matter so much

The single biggest mistake is dividing by paid hours instead of billable hours. Every non-billable hour still has to be paid for by the hours you do bill. A tech who only bills 1,200 hours has a higher effective cost than one who bills 1,500 — even at the same wage.

Turning burdened cost into a price

Burdened cost is your floor, not your price. To make a target margin you mark it up. If your burdened labor cost is $59/hour and you want roughly a 50% margin on labor, your billed labor rate needs to be near $118/hour. Charge your cost and you make nothing; charge below it and you lose money on every hour worked.

Don't forget travel time

Drive time between jobs is paid, burdened labor that often is not billed directly. On a 45-minute service call with 50 minutes of round-trip driving, more than half the labor cost is invisible if you only count wrench time. Track travel separately so it shows up in your job costs.

Final takeaway

Knowing your burdened labor cost changes how you bid, who you hire, and which jobs you accept. Calculate it once for each role, divide by realistic billable hours, and use it as the floor under every quote. It is the difference between feeling busy and being profitable.