What an Hour of Crew Time Actually Costs

Most contractors know what they pay a crew member per hour. Far fewer know what that crew member costs per hour of work actually billed to a job — and that second number is the one every bid depends on.

The gap between the two is called labor burden. It is not a rounding error. On a typical Florida field employee it adds roughly 40% to the hourly wage, and most of that increase comes from something other than taxes.

The Wage Is the Smallest Part You Are Missing

Start with a field employee paid $28 an hour for 2,080 paid hours a year — $58,240 in wages. On top of that wage, three statutory costs attach automatically:

• Employer FICA — 7.65%. That is 6.2% for Social Security on wages up to the 2026 base of $184,500, plus 1.45% for Medicare on every dollar with no cap. On $58,240 that is $4,455.
• FUTA — 0.6% on the first $7,000. The headline rate is 6.0%, but employers who pay their state unemployment tax in full and on time take the maximum 5.4% credit, leaving a net 0.6%. That is $42 per employee per year.
• Florida reemployment tax — 2.7% on the first $7,000 at the initial rate for a new employer. That is $189. Employers with a stable employment record earn a lower rate after a qualifying period, so pull your actual rate from your RT-6 rather than assuming the initial one.

Statutory total: $4,686, or about 8% on top of the wage. If you stopped here — and many bid worksheets do — you would be underpricing labor badly.

Workers' Compensation Is the Line That Varies Most

Workers' compensation premium is quoted as a rate per $100 of payroll, set by the NCCI class code for the work being performed and then adjusted by your experience modifier. Two contractors paying identical wages can carry very different premiums because one is coded for roofing and the other for interior finish work.

There is no single rate to plug in here, and any figure you find quoted as "the" construction rate is someone else's class code. Read it off your own declarations page. For a worked example only, assume your policy shows $9.50 per $100 of payroll:

$58,240 ÷ 100 × $9.50 = $5,533

One piece of timing worth knowing: Florida's Office of Insurance Regulation approved a 6.9% workers' compensation rate decrease effective January 1, 2026 for new and renewal policies, on a filing from NCCI — the ninth consecutive year of decreases. If your burden rate was built on a pre-2026 policy, it is now slightly overstated. That is the rare direction this error runs.

Getting the classification and reported payroll right matters beyond the burden calculation, because carriers reconcile the policy against actual payroll and duties at the end of the term. The common traps are covered in workers' compensation and payroll tax pitfalls.

The Real Multiplier Is Non-Billable Time

Here is where most burden calculations quietly fail. You pay for 2,080 hours. You do not bill 2,080 hours.

Subtract, for this employee:

• 80 hours of holiday and paid time off
• 15% of the remaining 2,000 hours to drive time between jobs, shop and yard time, loading and unloading, cleanup, safety meetings, training, and weather

That leaves 1,700 billable hours — not 2,080. Now divide the full annual cost by the hours you can actually charge for:

• Wages: $58,240
• Statutory payroll taxes: $4,686
• Workers' compensation: $5,533
• Total: $68,459

$68,459 ÷ 1,700 billable hours = $40.27 per billable hour

The $28 employee costs $40.27 — a multiplier of about 1.44 — before one dollar of overhead, and before any profit.

Non-Billable Time Moves the Number More Than Tax Rates Do

Change the tax assumptions and the answer barely moves. Change the billable-hour assumption and it moves a lot.

Hold everything else constant and assume 25% non-billable time instead of 15%. Billable hours fall to 1,500, and the same $68,459 becomes $45.64 per billable hour — a $5.37 swing from a single scheduling input. That is more than the entire FUTA and reemployment tax load put together, several times over.

This is why burden rate is a job-costing problem and not a payroll problem. The inputs that matter most — drive time, rework, waiting on materials, crews idle between jobs — are the ones nobody records unless the time-tracking system asks for them. If your crews clock in and out of the day rather than in and out of jobs, you cannot compute this number, and you cannot verify it later against what jobs actually cost while they are still running.

Burden Rate Is Only the Direct Half

A common mistake is to treat the burdened labor rate as the number you bid from. It is not. Burden covers the direct cost of putting a person on a job. It does not include your truck payments, your office, your insurance beyond the policies tied to payroll, your own pay, or your estimator's time.

Those are overhead, and they get recovered separately — by dividing annual overhead across realistic annual capacity. The full picture for a bid is:

1. Burdened labor plus materials, equipment, and subcontractor cost — the direct cost of the work
2. Plus that job's share of overhead
3. Plus your target profit

Skip the second step and you produce a bid that covers its own costs and contributes nothing to keeping the business open. That failure mode, and the arithmetic for the overhead half, are worked through in why turning down low-margin work protects profit.

Recalculate It On a Schedule

A burden rate is a snapshot, and four things move it during a normal year: a workers' compensation renewal, a change in your reemployment tax rate, a raise, and a shift in how much of the crew's time is actually reaching jobs. Any one of them can move the multiplier by a few points.

Rebuild the number at least annually, and re-check it whenever your workers' compensation policy renews or you add crew. Folding it into an existing monthly financial review is the least painful way to keep it current.

How KDM Accounting Services Can Help

We help Florida contractors build a labor burden rate they can defend and actually use in bids. That work usually includes:

• Pulling the real statutory rates from your filings rather than published defaults
• Reading your workers' compensation declarations page by class code
• Setting up time tracking that separates billable job hours from everything else
• Connecting the burden rate to job costing so estimates can be checked against results
• Rebuilding the rate when policies renew or payroll changes

Start With One Employee

You do not need a system to begin. Take one field employee, pull their wage, add the three statutory costs, add workers' compensation from your own policy, and divide by the hours you honestly believe reached a job last year.

If the result is meaningfully above what your estimates assume, every open bid is carrying the same error.

If you would like help building a burden rate that holds up — and connecting it to the way you bid and track jobs — contact KDM Accounting Services.