Ask ten contractors how they are calculating labor burden on gross payroll and you will get ten different answers – and all ten will swear that their number is right! Here is how we calculate it using the example of a commercial carpenter with a class code of 5403 :
$10.000 Gross Pay
$ 1.3270 (+) Workman’s Compensation Rate: 13.27% charged by State Fund for the 5403 class code (2009 rates)
$ .0531 (+) NYS assessment: charged on anyone working in “commercial”. It is 4% of the workman’s comp premium.
$ .0690 (-) Experience Modifier: ours is .95 so we save 5% of the comp premium. Yours may be more or less.
$ .6925 (+) Unemployment: Your rate could be as much as 9.25%
$ .0750 (+) State Reemployment Service fund
$ .0800 (+) Federal Unemployment (Form 940)
$ .0200 (+) Disability Insurance
$ .7650 (+) FICA: This is the employers contribution to the Social Security fund and the Medicare fund
$ .7000 (+) Liability Insurance: What percent of your gross payroll is your liability premium?
$ 1.5000 (+) Medical benefits, vacation days, sick days, 401k, and first aid costs. Estimate this number based on previous years as a percentage of your gross payroll.
$ .2500 (+) The administrative cost to process all of the above. If you have a few employees then this number could be as much as $1 or $2. If you are a large employer, then this is likely less.
$15.4816 Burden is just over 50% or $5.33 of every $10 paid out.
How do you calculate burden?? Leave a comment here.