What Is the Cost of Unburdened Labor?
When reviewing the cost of hiring and maintaining employees for your business or for a particular job, you may encounter the term "unburdened labor." This is another way of describing the amount of wages or salaries you pay directly to your employees. By contrast, your "burdened" labor costs include other expenses such as payroll taxes and employee benefits.
Unburdened Labor Costs
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The method for calculating your business's total unburdened labor costs depends on how you pay your employees. For hourly employees, count only the hours worked, not including any paid vacation or paid sick time. For salaried employees, include the entire base salary regardless of hours worked, but only when totaling your company-wide costs.
Unburdened Labor Rate
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An employee's unburdened labor rate refers to his hourly rate. In the case of a salaried employee, divide the number of hours in his schedule by his salary to determine his unburdened rate. For example, if an employee makes $1,500 every two weeks and works a regular 40-hour week, divide $1,500 by 80 hours to get an unburdened labor rate of $18.75 per hour.
Burdened Labor Costs
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Burdened labor costs are higher than unburdened costs, because they also include expenses directly attributable to maintaining employees, such as payroll taxes, health insurance benefits, training and employee uniforms and supplies. In the case of hourly employees, include the cost of paid sick time, paid vacation leave and paid holidays. Depending on how your accounting is set up, you may also include part of your office and administrative overhead.
Burdened Labor Rate
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In some cases, you may need to find your burdened labor rate, either as part of your company financial statement or while estimating job costs in preparation for a bid. The burdened labor rate is calculated by taking your burdened labor costs and dividing by the actual hours worked. For example, if an employee works only 48 weeks per year after accounting for vacation, sick days and holidays, and his burdened labor cost is $45,000 per year, divide $45,000 by 1,920 hours to get a burdened labor rate of $23.44 per hour.
Writer Bio
Alan Sembera began writing for local newspapers in Texas and Louisiana. His professional career includes stints as a computer tech, information editor and income tax preparer. Sembera now writes full time about business and technology. He holds a Bachelor of Arts in journalism from Texas A&M University.