Labor Cost Calculator
Calculate total employee labor costs including wages, benefits, taxes, and overhead burden rates
The employee's base wage before any additional costs
Health, 401k, PTO, etc.
FICA, FUTA, State, etc.
Training, equipment, space
Total hourly cost including all burden (use the Burden Rate mode to calculate this)
How many hours of labor to produce one unit of product/service
Optional: calculate total labor cost for multiple units
% burden on top of base wages
Cost Breakdown
Base Pay
Benefits
Taxes
Overhead
Gross Annual Pay
Base wages only
Burdened Hourly Rate
True cost per hour
Hourly Burden
Added cost per hour
Labor Cost Per Unit
Direct labor per item
Total Labor Cost
For units
Industry Labor Cost Benchmarks
Labor cost as a percentage of revenue by industry
Quick Tips
- • FICA taxes (Social Security + Medicare) are typically 7.65% of wages for employers
- • Benefits typically add 20-35% on top of base wages for full-time employees
- • Overhead includes workspace, equipment, training, and administrative costs
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About Labor Cost Calculator
What is Labor Cost?
Labor cost is the total amount of money paid to employees plus all associated costs of employing them. This includes not just wages or salaries, but also benefits, payroll taxes, training, and other overhead expenses. Understanding true labor costs is essential for accurate budgeting, pricing, and profitability analysis.
Labor Cost Formulas
Total Labor Cost
Total Labor Cost = Gross Pay + Benefits + Payroll Taxes + Training + Overhead
Hourly Burden Rate
Hourly Burden = (Annual Benefits + Taxes + Overhead) / Annual Working Hours
Burdened Hourly Rate
Burdened Rate = Base Hourly Rate + Hourly Burden
Labor Cost Per Unit
Labor Cost Per Unit = Burdened Hourly Rate × Time to Produce One Unit
Labor Cost Percentage
Labor Cost % = (Total Labor Cost / Revenue) × 100
How to Use This Calculator
- Select your calculation mode (Total Cost, Burden Rate, or Cost Per Unit)
- Enter the base wage or hourly rate
- Add benefits, taxes, and overhead percentages
- Click Calculate to see comprehensive results
- Compare with industry benchmarks
Components of Labor Cost
Direct Costs
- Base wages or salary
- Overtime pay
- Bonuses and commissions
- Paid time off (vacation, sick leave)
Indirect Costs (Burden)
- Health insurance
- Retirement contributions (401k matching)
- Payroll taxes (Social Security, Medicare, FUTA)
- Workers' compensation insurance
- Training and development
- Equipment and supplies
- Uniforms or work attire
Industry Benchmarks for Labor Cost Percentage
| Industry | Labor Cost % of Revenue |
|---|---|
| Retail | 10-15% |
| Manufacturing | 15-25% |
| Healthcare | 40-50% |
| Technology | 25-35% |
| Hospitality | 25-35% |
| Construction | 20-30% |
| Professional Services | 40-60% |
| Food Service | 25-35% |
Why Calculate Labor Burden?
- Accurate Job Costing: Know true cost per hour for billing
- Competitive Pricing: Set rates that ensure profitability
- Budget Planning: Forecast expenses accurately
- Hiring Decisions: Understand true cost of new employees
- Profitability Analysis: Identify opportunities for cost reduction
Tips for Managing Labor Costs
- Track all costs: Include hidden expenses like training and turnover
- Benchmark regularly: Compare to industry standards
- Optimize scheduling: Reduce overtime and idle time
- Invest in retention: Lower turnover reduces hiring costs
- Automate where possible: Technology can reduce labor needs
Frequently Asked Questions
What is a typical labor burden rate?
Labor burden typically adds 20-40% on top of base wages, depending on the benefits package and location.
How do I calculate labor cost for a project?
Multiply the burdened hourly rate by estimated hours. Add any project-specific costs like travel or materials.
Should I include training costs in labor burden?
Yes, training costs should be included as they are a real cost of employing workers. Divide annual training costs by annual working hours.
What's the difference between direct and indirect labor costs?
Direct costs are directly tied to production (wages for making products). Indirect costs support operations (supervision, HR, maintenance).
Note: This calculator provides estimates for planning purposes. Actual labor costs may vary based on location, industry regulations, and individual circumstances. Consult with an accountant for precise figures.