What is fully burdened labor rate?

The fully burdened labor rate is the total cost a company incurs to employ a worker, beyond just their base salary or hourly wage. It includes additional expenses such as benefits, payroll taxes, paid time off, training, travel, equipment, and other overhead costs.

How to calculate your fully burdened labor rate?

Fully burdened labor rate per full-time employee = salary + bonus + commission + payroll taxes + benefits + miscellaneous expenses. Divide the total by 2,080 hours to get the hourly rate. For example: ($80,000 + $20,000 + $2,500 + $4,500 + $3,000) ÷ 2,080 = $52.88/hour.

What is the impact of remote work on fully burdened labor rates?

Remote work reduces traditional office overhead costs like rent and utilities but introduces new costs such as home office stipends, cybersecurity investments, and collaboration software. These changes must be factored into updated labor rate calculations.

How often should companies review and update their fully burdened labor rate calculations?

Companies should review and update their fully burdened labor rate calculations at least once a year. More frequent updates are advised during times of wage increases, benefits changes, or workforce structure shifts to maintain financial accuracy.

Are there any industry-specific considerations when calculating the fully burdened labor rate?

Yes, industry context matters. For example, construction companies might include equipment depreciation or safety costs, while healthcare organizations factor in continuing education and malpractice insurance. Tailored calculations ensure accuracy and better decisions.

What are the common pitfalls in calculating the fully burdened labor rate?

Common pitfalls include missing expenses like overtime, recruitment, or training; using outdated data; or applying uniform rates across different roles. Avoid errors by using current, role-specific data and factoring in all relevant costs.

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