Labor Cost Calculator

Background.

A worker paid $25 an hour costs the business that employs them noticeably more than $25 an hour. On top of the wage come the employer's share of payroll taxes, unemployment insurance, workers' compensation cover and whatever benefits the job carries — a health plan, a retirement match, paid holidays. Those extras, taken together, are the labor burden, and wage plus burden is the loaded labor cost: what an hour of that person's time really costs.

The loaded figure is the one that matters whenever labor is what is being priced. A contractor quoting a job, a restaurant setting menu prices, or a manager weighing a new hire against outsourcing all need it, not the wage on the offer letter. Costing work from base pay alone is one of the easiest ways for a small firm to underprice itself.

Here the burden goes in as one percentage of wages. That keeps the arithmetic transparent, but the percentage has to be built honestly. Some items scale with pay, such as the employer's half of Social Security and Medicare. Others are a fixed amount per person, such as a health plan premium, and weigh far more heavily on a $15 wage than on a $60 one. Some payroll taxes stop once an employee's year-to-date pay passes a ceiling, so a percentage worked out from January payroll can overstate the cost of December.

Every hour is also treated as paid at the same base rate. No overtime premium is added, and union scales, shift differentials and state-specific payroll taxes are not looked up; fold them into the wage, the hours or the burden before you enter them.

What is labor cost calculator?

Loaded labor cost is the full amount an employer spends for a block of paid hours: the gross wage plus the employer-side costs that ride on top of it. Those extra costs, written as a percentage of wages, are the labor burden; a 30% burden means every dollar of pay brings another 30 cents of taxes and benefits with it. The page reports the cost two ways, as a total for the hours entered and as a loaded hourly rate, both in US dollars. General overhead such as rent, vehicles, tools and supervision is not part of it.

How to use this calculator.

1. 01Enter the Base hourly wage before any employee deductions. For a salaried role, divide annual salary by annual paid hours — 2,080 for a 40-hour week paid all year.
2. 02Enter the Payroll tax and benefit burden as a percentage of wages. If you do not know it, total last year's employer-paid taxes, insurance and benefits for the role and divide by that year's gross wages.
3. 03Enter Paid hours for the span you are costing: a week, a pay period or a whole project. If paid holidays are already counted inside the burden, enter only hours worked so leave is not counted twice.
4. 04If some hours are paid at time and a half, count each of them as 1.5 hours; no overtime premium is applied for you.
5. 05Read the loaded labor cost for the whole period, and the loaded hourly rate beside it for quoting or comparing.

The formula.

Loaded labor cost = wage × (1 + burden rate) × hours. The burden rate is the percentage you enter divided by 100, so 30% becomes 0.30 and the multiplier is 1.30. The first part, wage × (1 + burden rate), is the loaded hourly rate; multiplying it by hours gives the total. Every term multiplies, so the result is proportional to the wage and to the hours: double the hours and the cost doubles, raise the wage by 10% and the cost rises 10%. The burden behaves differently. Raising it from 30% to 40% lifts the multiplier from 1.30 to 1.40, which adds about 7.7% to the cost rather than 10%. No tax rates are built in; the burden percentage is the only route by which payroll taxes and benefits enter, so the answer is only as reliable as that one figure.

A worked example.

Frequently asked questions.

References& sources.

1. [1]OpenStax, Rice University. Principles of Finance, 2022. Chapters 6–10. Retrieved 2026-08-06.
2. [2]U.S. Internal Revenue Service. Tax guidance current 2026. Official forms, instructions and tax topics. Retrieved 2026-08-06.
3. [3]U.S. Securities and Exchange Commission. Investor.gov current 2026. Investment products and risk. Retrieved 2026-08-06.