Labor burden calculator: cost per billable hour for contractors

Add up everything you pay for an employee on top of wages, then divide by their annual wages.

Labor burden % = (payroll taxes + workers comp + insurance + benefits + truck, phone and tools) ÷ annual wages

Social Security, FUTA and SUTA stop at a wage base, so the calculator applies them per person instead of as one flat percent.

Example: an HVAC tech at 30 dollars an hour for 2,080 paid hours earns 62,400 dollars. Employer taxes, workers comp, liability, health, a 3% match and a truck add 31,575 dollars. The burden is 50.6% and the all-in cost is 93,975 dollars a year.

It is the all-in cost of an employee divided by the hours you can bill, the number every quote has to beat.

1. Billable hours = paid hours − paid time off and holidays − drive, shop and other unbilled time
2. Cost per billable hour = (annual wages + burden) ÷ billable hours

Dividing by all 2,080 paid hours gives the cost per paid hour. A billed hour costs you more.

Example: the same tech takes 120 hours off and spends 360 hours driving and in the shop, leaving 1,600 billable hours. The cost per paid hour is 45.18 dollars; the cost per billable hour is 58.73 dollars, 1.96 times the wage.

Four employer taxes:

• Social Security: 6.2% of wages up to 184,500 dollars per employee in 2026 (IRS Publication 15).
• Medicare: 1.45% of all wages, with no cap. The extra 0.9% over 200,000 dollars has no employer share.
• FUTA: 6.0% of the first 7,000 dollars, or 0.6% after the full 5.4% credit for state unemployment tax paid in full and on time (IRS Publication 15).
• SUTA: your state’s rate on your state’s wage base, both on your yearly rate notice.

States with unpaid federal unemployment loans get a smaller FUTA credit. The Department of Labor’s potential 2026 list names California and the U.S. Virgin Islands, if their loans are still unpaid on November 10, 2026. Enter any reduction in the FUTA credit reduction field.

Divide the cost per billable hour by one minus the margin you want.

Bill rate = cost per billable hour ÷ (1 − target margin)

Example: 58.73 dollars ÷ 0.60 = 97.89 dollars an hour for a 40% margin on labor. A 40% markup would give only 82.22 dollars, a 28.6% margin.

The labor cost leaves out rent, office staff and software. The shop rate calculator spreads those over your billable hours for a final rate. To see labor cost on each job, our field guide on job costing in QuickBooks Online for contractors shows how to get payroll onto projects.

Yes. In step 3, paste the name and wage columns straight from Excel or Google Sheets, drop a CSV, or type each person in.

Each person gets their own Social Security, FUTA and SUTA caps, burden percent, all-in cost and cost per billable hour. Time off and unbilled hours scale with each person’s paid hours. The download opens in Excel with every line for every person.

A payroll summary from QuickBooks Payroll or Gusto has the wages and hours. Your insurance policies and benefit invoices have the rest.