True Labor Cost

Wages Are Only the Starting Point

Hourly wage is just base pay.

It does not include the real costs required to put that worker on a job.

What Makes Up True Labor Cost

• Payroll taxes
• Workers comp insurance
• Benefits, if you offer them
• Downtime and other non-billable time
• Training and onboarding
• Travel time

Billable vs Non-Billable Time

Not every hour worked is billable.

A crew member might work 40 hours in a week, but some of that time goes to loading materials, driving, cleanup, callbacks, meetings, or waiting on the next task. Forty hours worked does not mean 40 billable hours.

Why This Matters

• Underpricing jobs
• Thin or negative margins
• Cash flow pressure

Simple Example

$25/hour wage → true cost might be $35 to $45/hour depending on payroll burden, insurance, travel, downtime, and how many of those hours are actually billable.

That gap is where many contractors lose margin. They estimate using wage rate, but the business pays for much more than wages.

What to Do Instead

• Calculate true labor cost
• Use realistic billable hours
• Build pricing from real numbers