Labor Burden Rate Calculator
Answers the Question
How much of workers' income is not expressed in Salary?
Calculator for Labor Burden Rate
What Is the Labor Burden Rate?
Hiring staff can be expensive. Not only are do employers have to pay salaries, but there are a lot of other costs such as social security, retirement benefits, vacation pay, and healthcare costs that add up. The labor burden rate attempts to gather all of these extra costs so they can be analyzed in one place.
Why Is it Important?
- Without understanding the true cost of an employee, companies may find that they overextend themselves and run out of working capital. At the extreme, companies may hire employees who wind up costing more than the value that they ultimately provide.
Formula(s) to Calculate Labor Burden Rate
- LABOR BURDEN RATE = 100 * (NONSALARY COSTS FOR LABOR / SALARY COSTS FOR LABOR)
Common Mistakes
- Not including all overhead costs in the calculations. Some are less obvious than others.
- Assuming that all costs should be cut. Many costs attract better employees or keep them working at higher levels of efficiency.
- Assuming that the burden rate should be standardized across all types of employees. Some require higher costs than others.