Contract Manufacturing, Job Shop Quoting & Make-to-Order calculator
Labor Hour Rate Calculator
Find what a billed hour of direct labor costs after payroll taxes, benefits, paid leave and unbilled time, and check the labor rate you quote. You need the wage, burden, paid and leave hours, and utilization.
What this calculator does
- What one billed hour of a direct employee costs once taxes, benefits, paid leave and unbilled time load the wage.
Formula used
- Annual loaded cost = base wage × paid hours × (1 + payroll taxes and benefits)
- Hours at work = paid hours − paid leave hours; billable hours = hours at work × direct labor utilization
- Loaded cost per hour worked = annual loaded cost ÷ hours at work
- Labor hour rate = annual loaded cost ÷ billable hours
- Over or under recovery = quoted labor rate − labor hour rate; annual = per hour × billable hours
Inputs explained
- Direct Labor Base Wage: Straight-time hourly pay from payroll, before taxes and benefits.
- Payroll Taxes and Benefits: Employer taxes, insurance and retirement ÷ straight-time wages paid, from payroll.
- Paid Hours per Year: Straight-time hours paid per employee, including holidays and vacation.
- Paid Leave Hours per Year: Holiday, vacation and sick hours paid but not worked.
- Direct Labor Utilization: Hours charged to jobs ÷ hours at work, from job tickets.
- Labor Rate in Your Quotes: Labor rate on your quoting sheet, excluding machine time and overhead.
How to use the result
- Best suited to pricing assembly, deburr and inspection labor, costing a raise or a new hire, checking labor recovery after a slow quarter.
- One wage per rate: a crew mixing assemblers and toolmakers needs a rate for each pay grade.
Current U.S. benchmarks
- As of Sep 2026, average hourly earnings in U.S. manufacturing are $30.21 (BLS), up 3.4% from a year earlier. Burdened shop rates typically run 1.3 to 1.8 times earnings once benefits and overhead are loaded.
- As of Aug 2026, U.S. manufacturing runs at 75.7% of capacity (Federal Reserve via FRED), down 0.1 points from a year earlier. Enter your own plant's utilization; the national figure is a reference point for how loaded the industry is.
- The U.S. prime lending rate is 7.00% (Federal Reserve via FRED, 2026-10-02). Payback and financing math should start from today's rate, not a remembered one.
Common questions
- What goes in payroll taxes and benefits? Employer Social Security and Medicare, unemployment insurance, workers' comp, insurance and retirement contributions, divided by straight-time wages paid. Bureau of Labor Statistics employer cost data for private manufacturing in 2026 Q2 put them near 27%.
- Should paid leave be in the burden percentage? No, not here. This calculator counts leave as hours paid but not worked, so 200 leave hours on 2,080 paid hours leaves 1,880 hours at work to carry the year's cost.
- Why is the labor hour rate so much higher than the wage? Because taxes and benefits load the wage, and you pay for every paid hour but bill only some. At a $30.00 wage, 27% burden, 200 leave hours and 85% utilization, each billed hour costs $49.59.
- How much does a $1.00 raise add to the labor hour rate? More than $1.00. The raise is paid on every paid hour and carries burden, but is recovered only on billed hours. At the defaults each $1.00 of wage adds $1.65 to the labor hour rate.
Related guides
Last reviewed 2026-10-02.