TCF1088: Labor Burden: The Number That’s Bleeding You Dry
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Key Takeaways
Always calculate your true labor burden, which includes wages, payroll taxes, workers' comp, benefits, paid time off, and unbillable hours, as it can be 1.5 to 2 times the employee's direct wage.
Do not price your services based solely on an employee's hourly wage; instead, base your pricing on the calculated total labor burden to ensure profitability.
Review and update your labor burden calculation quarterly, as costs like insurance and taxes can change, impacting your margins.
Overcome the fear of being 'too expensive' by confidently pricing for true costs; losing 'cheap' jobs allows you to focus on profitable work.
Engage with a CPA or bookkeeper to accurately total all labor-related costs over the past 12 months and divide by total field hours to determine your true hourly cost.
Understand that ignoring labor burden creates an illusion of profit, ultimately leading to financial stress and underpayment for your hard work.
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