function calculateBurdenedRate() {
// 1. Get Input Values
var baseHourlyWage = parseFloat(document.getElementById('baseHourlyWage').value);
var annualHours = parseFloat(document.getElementById('annualHours').value);
var paidTimeOffDays = parseFloat(document.getElementById('paidTimeOffDays').value);
var nonBillableHoursInput = parseFloat(document.getElementById('nonBillableHours').value);
var payrollTaxRate = parseFloat(document.getElementById('payrollTaxRate').value);
var annualBenefits = parseFloat(document.getElementById('annualBenefits').value);
var annualOverhead = parseFloat(document.getElementById('annualOverhead').value);
// Validation for NaN (set defaults to 0 if empty)
if (isNaN(baseHourlyWage)) baseHourlyWage = 0;
if (isNaN(annualHours)) annualHours = 2080;
if (isNaN(paidTimeOffDays)) paidTimeOffDays = 0;
if (isNaN(nonBillableHoursInput)) nonBillableHoursInput = 0;
if (isNaN(payrollTaxRate)) payrollTaxRate = 0;
if (isNaN(annualBenefits)) annualBenefits = 0;
if (isNaN(annualOverhead)) annualOverhead = 0;
// 2. Calculate Gross Pay
var grossAnnualPay = baseHourlyWage * annualHours;
// 3. Calculate Burden Costs
var taxCost = grossAnnualPay * (payrollTaxRate / 100);
var totalBurdenCost = taxCost + annualBenefits + annualOverhead;
var totalAnnualCost = grossAnnualPay + totalBurdenCost;
// 4. Calculate Productive Hours
// Convert PTO days to hours (assuming 8 hour days)
var ptoHours = paidTimeOffDays * 8;
var productiveHours = annualHours – ptoHours – nonBillableHoursInput;
// Prevent division by zero
if (productiveHours <= 0) {
alert("Productive hours cannot be zero or negative. Please check your PTO and Non-Billable inputs.");
return;
}
// 5. Calculate Burdened Rate
var burdenedHourlyRate = totalAnnualCost / productiveHours;
// 6. Calculate Burden Percentage (Markup over base wage)
// Note: This compares the burdened rate to the base wage
var burdenMarkup = ((burdenedHourlyRate – baseHourlyWage) / baseHourlyWage) * 100;
// 7. Update DOM
document.getElementById('displayTotalCost').innerHTML = "$" + totalAnnualCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('displayProductiveHours').innerHTML = productiveHours.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 1});
document.getElementById('displayBurdenPerc').innerHTML = burdenMarkup.toFixed(2) + "%";
document.getElementById('displayBurdenedRate').innerHTML = "$" + burdenedHourlyRate.toFixed(2);
// Show results
document.getElementById('resultsSection').style.display = "block";
}
What is a Burdened Labor Rate?
The Burdened Labor Rate is the true cost to a company for an employee's hour of work. Unlike the base hourly wage, which only accounts for the money paid directly to the employee, the burdened rate includes all the hidden costs associated with employment, such as payroll taxes, insurance, benefits, and overhead.
Calculating this rate is critical for service businesses, contractors, and manufacturers to ensure that their pricing strategies cover all costs and generate a profit. If you bill a client based solely on an employee's gross wage, you are likely losing money on every hour worked.
How to Calculate Burdened Labor Rate
To determine the fully burdened rate, you must account for two main factors: the Total Annual Cost of the employee and their Actual Productive Hours.
Step 1: Determine Total Annual Cost
This includes:
Gross Wages: Base hourly rate × Total annual hours (usually 2080).
Payroll Taxes: Employer portion of Social Security, Medicare, FUTA, SUTA, and Workers' Compensation.
Benefits: Health insurance, 401(k) contributions, bonuses, and stipends.
Overhead (Optional): Allocated rent, utilities, software subscriptions, and equipment usage.
Step 2: Determine Productive Hours
Employees are rarely billable 100% of the time. To get an accurate rate, subtract non-productive time from the standard 2,080 work hours per year:
Paid Time Off (PTO): Vacation days, sick leave, and public holidays.
Non-Billable Time: Internal meetings, training, administrative tasks, and breaks.
Step 3: The Formula
Burdened Rate = Total Annual Cost / Total Productive Hours
Example Calculation
Let's say you pay an employee $30/hour.
Base Annual Salary: $62,400 (2080 hours)
Taxes & Benefits: $15,000
Total Cost: $77,400
Productive Hours: 1,900 (after holidays/PTO)
While the base rate is $30, the burdened rate is $77,400 / 1,900 = $40.74/hour. This means you must charge at least $40.74 just to break even on this employee's time.