Employee Burden Rate Calculator
What is the Employee Burden Rate?
The employee burden rate is the total cost a company incurs to employ an individual beyond their base salary. While gross salary is the most visible expense, employers must also pay for payroll taxes, health insurance, workers' compensation, paid time off, and various overhead expenses like office space and equipment.
Understanding this rate is critical for pricing services, project budgeting, and determining the true ROI of a new hire. A typical burden rate usually ranges between 20% and 40% of the base salary.
How to Calculate Employee Burden Rate
The calculation follows a simple logic of identifying all "hidden" costs and comparing them to the base salary. Use the following formula:
1. Total Labor Burden = Payroll Taxes + Benefits + PTO + Training + Equipment + Insurance
2. Burden Rate = (Total Labor Burden / Gross Salary) x 100
Example Calculation
Let's say you hire a software developer with a gross annual salary of $80,000. Your additional expenses for this employee are:
- Payroll Taxes: $6,120 (FICA 7.65%)
- Health Insurance: $5,000
- 401k Matching: $2,400
- Equipment: $2,000 (One-time laptop and software)
- Paid Time Off: $3,000
Total Labor Burden: $18,520
Burden Rate: ($18,520 / $80,000) = 0.2315 or 23.15%
Total Fully Burdened Cost: $98,520
Why It Matters for Your Business
If you only factor in the $80,000 salary when bidding on a contract, you are ignoring $18,520 in actual cash outlays. This oversight can quickly erode profit margins. By calculating the burden rate, you can accurately set your hourly billing rates to ensure all costs—and profits—are covered.