How to Calculate Contractor Labor Cost
Start with total crew hours, then multiply by the loaded hourly cost you use for each worker.
Basic labor cost formula
Workers × hours per worker × loaded hourly cost = estimated labor cost.
A loaded labor cost can include more than the wage itself. Depending on how your business tracks costs, it may include employer payroll taxes, workers compensation, benefits and other labor burden. Use a number based on your own records.
Worked example
A 3-person crew working 8 hours creates 24 crew hours. At a loaded labor cost of $35 per hour, estimated labor cost is $840.
If that labor is being priced at a 30% target gross margin, the selling-price formula is $840 ÷ 0.70 = $1,200. Whether that pricing method is appropriate depends on what other overhead and job costs you recover elsewhere.
Do not confuse wage with true labor cost
Pricing directly from the employee wage can understate what labor actually costs the business. Define a consistent loaded-cost method and review it when payroll, insurance or benefit costs change.
Run the labor calculation
Use your own workers, hours, loaded hourly cost and target margin.
Open Labor Cost CalculatorGeneral estimating information only; not payroll, tax or accounting advice.