Labour burden: what an hour of your own crew really costs, and how to build the rate
The drywall estimator opens a time-and-material worksheet that has not been updated for four years. The wage has changed, but the added amount is still the same. Nobody can identify which benefits or employer contributions that amount includes.
Build the rate from identified employer costs and a stated hours basis, then date the result and its assumptions. AACE describes labour burden as benefits and employer payroll-related taxes and insurance; it distinguishes that from wages alone and wider all-in pricing. The CRA also distinguishes employer CPP and EI contributions from employee deductions. Keep productive-hour adjustments, job allowances and profit visible so they are not added twice under a single burden label.
Replace the inherited percentage with a build-up
- Choose the crew category and period. Use payroll and benefit records for the trade being priced. Confirm whether the rate represents straight time, overtime or a blended allowance, and identify which estimating hours it will be applied to.
- Start with employer payroll costs. Separate gross wages from the employer's actual contributions, insurance and benefit costs. Obtain current statutory inputs from the responsible federal and provincial agencies. Employee income-tax deductions are not an additional employer cost merely because the employer remits them.
- Identify paid-time treatment. Have payroll confirm holiday, vacation and other paid-time costs under the applicable arrangements. Show whether each is already inside the payroll total. Record the basis instead of adding another percentage because an older estimate did so.
- Choose the denominator explicitly. A cost per paid hour differs from cost per productive hour. If the estimate uses productive hours, identify the planned paid hours not producing measured output and make one documented adjustment. Do not also bury that same adjustment in the production rate.
- Keep other allowances separate. Tools, PPE, supervision and orientation may sit in different company cost accounts. State where each is carried and check for duplication with the job budget. A burdened cost rate is not automatically the price allowed on a T&M ticket.
- Reconcile and review. Have the accountant or payroll lead check the total against the underlying period. Date the accepted rate, list its included items and schedule a review when wages, benefits or the crew mix change. Confirm commercial billing rates separately.
Common mistakes
- Applying one old percentage across trades with different benefit arrangements.
- Adding employee deductions again as employer expense.
- Counting paid nonproductive time in both the hourly rate and the quantity rate.
Checklist
Label the accepted rate
- Trade and payroll period.
- Employer components and their records.
- Paid or productive hours basis.
- Separate tool and supervision treatment.
- Duplicate allowances removed.
- Review date and authorized reviewer.
Check your understanding
The productive-hour rate is higher than the paid-hour rate from the same payroll total. Does that mean payroll costs increased?
