Fully Burdened Labor Rate: The True Cost of a US Employee
Salary is only the start. Add payroll taxes, benefits, overhead and non-billable time to find what every billable hour really costs.
An employee on $75,000 a year does not cost you $75,000, and they do not cost you $36.06 an hour. Once you add payroll taxes, benefits, overhead and the hours nobody can bill, the real number, the fully burdened labor rate, is closer to $75 for every hour you can actually charge for.
Here is how to work it out for anyone on your team, step by step, using US rules.
The quick answer
Fully burdened labor rate = total yearly cost of the employee ÷ billable hours per year
For a $75,000 employee that is $107,008 ÷ 1,422 hours = $75.25.
Want to skip the math? Use our free charge-out rate calculator, pick United States and choose One employee.
Step 1: Add the burden on top of salary
| Cost | How to work it out | Example |
|---|---|---|
| Salary | Gross yearly pay | $75,000 |
| Employer FICA | 7.65% (6.2% Social Security + 1.45% Medicare) | $5,738 |
| FUTA | 0.6% on the first $7,000, after the standard state credit | $42 |
| State unemployment (SUTA) | Rate and wage base vary by state. The example uses 2.7% on $7,000 | $189 |
| Health insurance | Employer share of the premium. The example uses the 2026 average single-coverage premium of $9,804, with the worker paying 18% | $8,039 |
| Retirement match | 401(k) match. The example uses 3% | $2,250 |
| Workers’ compensation | Depends on your state and job classification. The example uses 1% | $750 |
| Overhead loading | Share of rent, software, equipment, admin and management, as a % of salary. The example uses 20% | $15,000 |
| Total yearly cost | $107,008 |
That is a burden multiplier of 1.43× salary. Family health coverage costs far more (the 2026 average family premium is $28,303), so run the numbers per person rather than using one multiplier for everyone.
Step 2: Work out the hours they are actually at work
A full-time year is 40 × 52 = 2,080 paid hours. But some of those weeks are paid time off.
| Weeks | |
|---|---|
| Weeks in a year | 52 |
| Vacation (10 days) | − 2 |
| Paid holidays (8 days) | − 1.6 |
| Sick days (allow 5) | − 1 |
| Weeks at work | 47.4 |
47.4 weeks × 40 hours = 1,896 hours at work. That is $107,008 ÷ 1,896 = $56.44 per hour worked.
Use your own PTO policy here. Many firms give more vacation or all 11 federal holidays, and every extra day off raises the hourly cost.
Step 3: Allow for time you cannot bill
Even at work, nobody bills every hour. Meetings, admin, training, sales and internal projects all take time. If this person bills about 75% of the hours they are at work:
1,896 × 0.75 = 1,422 billable hours, so $107,008 ÷ 1,422 = $75.25 per billable hour.
That is the employee’s fully burdened cost rate. Charge less than this and every hour they bill loses money.
A shortcut that lands in the same place
Skip Step 2 and use 2,080 hours with a lower billable %, around 68%, to cover PTO and non-billable time together. $107,008 ÷ 2,080 ÷ 0.68 = $75.66. Close enough for pricing, and it is how our calculator works.
From burdened cost to billing rate
To make a 25% margin on this person’s time, divide the cost rate by 0.75: $75.25 ÷ 0.75 = $100.33 an hour. Not sure why it is 0.75? See margin vs markup, or read the full method in how to calculate your charge-out rate.
Common mistakes
- Dividing salary by 2,080. $75,000 ÷ 2,080 = $36.06, less than half the fully burdened rate.
- Using one multiplier for everyone. Health coverage alone can swing the burden by $15,000 or more a person.
- Leaving out overhead. Rent, software and management time are part of every hour.
- Assuming everyone is 100% billable. Track it, then use the real figure.
Track real cost on every project
In ProWorkflow you can set a cost rate for each staff member, so every hour they log is costed at their fully burdened rate. Project profitability then shows live cost, spent and margin as the work happens. See how to set up cost and charge rates.
Hiring in Australia or New Zealand too? See the Australian version and the New Zealand version.
FAQ
What is a fully burdened labor rate?
It is the full hourly cost of an employee: salary plus payroll taxes, benefits, insurance and overhead, divided by the hours they can actually bill.
What is a typical labor burden multiplier?
Often 1.25× to 1.4× salary before overhead, and higher once overhead and family health coverage are included. Our example comes to 1.43× including a 20% overhead loading.
What payroll taxes do employers pay in the US?
Employer FICA of 7.65%, FUTA of 0.6% on the first $7,000 after the state credit, and state unemployment tax, which varies by state. Check the IRS and your state agency for current rates.
What billable % should I use?
Use your own timesheet data. Track a month of billable hours against hours worked. This is where a project management tool like ProWorkflow helps: every hour is logged against a project or task, so you can see your real billable % and base pricing decisions on accurate data, not assumptions.
