Your Real Hourly Cost: Working Out Labor Burden

“I pay my guy $25 an hour. What do I charge for him?” A rule of thumb like “double it” is a guess wearing the clothes of a rule. The real answer comes from two corrections you can work out on one sheet of paper: what an hour of his time actually costs you, and how many of his hours you can actually put on an invoice.

Twenty-five dollars is a realistic place to start. The Bureau of Labor Statistics puts the median wage for construction laborers and helpers at $22.44 an hour in May 2025, so a helper at $25 is a little above the national middle of the market. Pay in your area may run higher or lower.

Part one: what the hour costs you

Start with the year, not the hour. Say he is paid for 40 hours a week, 52 weeks a year. That is 2,080 paid hours, or $52,000 in wages at $25. Then add what you pay because he is on your payroll.

Payroll taxes you pay on top of his wage

IRS Publication 15, the employer’s tax guide for 2026, sets out the federal ones:

• Social Security: 6.2% of wages as the employer’s share, up to the 2026 wage base of $184,500.
• Medicare: 1.45% as the employer’s share, with no wage limit.
• Federal unemployment (FUTA): 6.0% on the first $7,000 of each employee’s wages, less a credit of up to 5.4% for state unemployment tax. With the full credit (your state tax paid in full and on time, and your state not a “credit reduction” state), the net rate is 0.6%, or $42 per employee per year.
• State unemployment: your state sets your rate and its own wage base. The figures are on the rate notice your state sends you.

Keep one thing straight: the 6.2% and 1.45% you withhold from his check are his taxes, not your cost. Your cost is the matching employer share on top.

Workers’ compensation

Workers’ comp is priced by the kind of work, and the details vary by state. The National Council on Compensation Insurance (NCCI) explains the method this way: the rate approved by the state for each classification is applied per $100 of payroll, and, for a business big enough to qualify under its state’s rules, an experience modifier then adjusts the total. Its own illustration shows how wide the spread runs, with a roofing rate of $63.171 per $100 of payroll next to a clerical rate of $0.75 in the same company. Those are example figures from NCCI’s guide, not your rates. Yours are on your policy, by class code.

Everything else he costs because he works for you

Health insurance, a retirement match, a phone, uniforms, the tools you replace: add whatever you actually pay. For scale, BLS measured private construction employers in June 2026 at $36.13 an hour in wages and $15.84 an hour in benefits, about 44 cents of benefits for every dollar of wages. Within that, legally required benefits were $4.42 an hour, insurance $3.90 and retirement and savings $2.39. If you offer no health plan or retirement match, your number will sit well below that average. Use your own.

Part two: the hours you can bill

This is where a lot of the money hides. You pay for 2,080 hours. You do not get to bill 2,080.

• Paid time off: the holidays and vacation days you pay for.
• Shop and drive time: loading the truck, driving to the job, the supply-house run in the middle of the day.
• Weather and waiting: the rain day you pay anyway, the morning lost to a late delivery or an inspector.
• Callbacks: hours spent fixing finished work, which nobody pays for twice.

Do not guess this number. Take two ordinary weeks of time cards and mark each hour billable or not. The billable share is the figure everything else depends on.

A worked example

Say that helper gets six paid holidays and five vacation days, and two weeks of time cards show about an hour and a half a day of shop, drive and supply time you cannot bill. Say your state’s notice gives you 2.7% on the first $9,000 of wages, and your workers’ comp rate for his class is $5.00 per $100 of payroll. Those inputs are made up for the example; put in your own.

The $25 helper costs about $36.37 for every hour you can invoice, roughly 1.45 times his wage. Notice which correction was bigger. The taxes and workers’ comp added about 13% to his wages. The hours you pay for and cannot bill pushed the hourly cost up by more than a quarter on top of that. Stop after the taxes and your number comes out too low.

From loaded cost to the rate you charge

$36.37 is still cost. It pays nothing toward the truck, the business insurance, your evenings on estimates or a profit. Those come out of margin. If your overhead and profit need a 35% margin, divide the loaded cost by 0.65: $36.37 ÷ 0.65 = $55.95, call it $56 an hour. How to find your own target margin, and why you divide rather than multiply, is in Markup vs. Margin: The Pricing Mistake That Eats Your Profit.

So in this example the answer to “I pay him $25, what do I charge?” is about $56, or 2.24 times his wage. “Double it” would have billed $50 and come up $5.95 short on every billable hour: across 1,618.5 hours, about $9,630 a year, from one helper.

Mistakes that keep the number too low

• Dividing by 2,080. Paid hours are not billable hours. Divide the year’s cost by the hours you can bill.
• Counting only the taxes. Workers’ comp, paid time off and the benefits you actually pay belong in the total.
• Leaving yourself out. If you work on the tools, your hours need a loaded cost too, or every job you price is subsidized by your own unpaid time.
• Doing it once. Redo the sheet when your workers’ comp policy renews, when your state sends a new rate notice, and when you give a raise.

One sheet, an hour of work, and you will know what every hour on the schedule costs before you price it. That number is the floor. Everything you charge above it is what keeps the business running.

General information, not legal or tax advice. Rules change and vary by state; check with the agency named above or a professional for your situation.